AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is entered into as of
April 7, 1998 by and among IQI, Inc., a New York corporation (the "COMPANY"),
ATC Communications Group, Inc., a Delaware corporation ("BUYER"), and ATC Merger
Sub, Inc., a New York corporation and wholly-owned subsidiary of Buyer
("NEWCO").
R E C I T A L S
A. Buyer owns all of the outstanding shares of capital stock of Newco.
B. The Board of Directors of each of Newco and the Company have determined
that it is fair to, and in the best interests of, their respective corporations
and stockholders for Newco to be merged with and into the Company upon the terms
and subject to the conditions set forth herein (the "Merger"). It is the
intention of the parties hereto that the Merger be treated as a tax-free
reorganization pursuant to Section 368(a)(2)(E) of the Code, and that the Merger
be accounted for under the "reverse purchase" method of accounting whereby the
Company will be treated as the acquiring entity for accounting purposes.
C. The Board of Directors of each of Newco, the Buyer and the Company have
approved the Merger in accordance with the General Corporation Law of the State
of Delaware or the Business Corporation Law of the State of New York, as
applicable.
D. Concurrently with the execution and delivery of this Agreement and as a
condition and inducement to Buyer's willingness to enter into this Agreement,
certain holders of the outstanding shares of common stock of the Company which
own approximately 85% of such outstanding common stock are entering into
agreements with Buyer, pursuant to which such shareholders will agree to grant
an irrevocable proxy coupled with an interest to representatives of Buyer to
vote such shares of common stock in favor of the Merger.
E. Concurrently with the execution of this Agreement, a principal
shareholder of the Company has provided a commitment letter to Buyer (the
"COMMITMENT LETTER") pursuant to which such shareholder has committed, subject
to the terms and conditions set forth in such letter, to extend financial
accommodations to Buyer in an amount of up to $2.0 million.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Unless the context otherwise requires, the terms defined in this Article I
shall have the meanings herein specified for all purposes of this Agreement,
applicable to both the singular and plural forms of any of the terms herein
defined. All accounting terms defined in this Article I and those accounting
terms used in this Agreement and not defined in this Article I shall, except as
otherwise provided for herein, be construed in accordance with GAAP.
"AAA" shall have the meaning assigned to such term in Section 11.08.
"ACTION" shall mean any actual or threatened claim, action, suit,
arbitration, hearing, inquiry, proceeding, complaint, charge or investigation by
or before any Governmental Entity or arbitrator and any appeal from any of the
foregoing.
"ACQUISITION PROPOSAL" shall have the meaning assigned to such term in
Section 8.08.
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"ADDITIONAL SHARES" shall have the meaning assigned to such term in Section
10.02(e).
"AFFILIATE" shall mean any Person which directly or indirectly controls, is
controlled by, or is under common control with, the indicated Person.
"AGREEMENT" shall have the meaning assigned to such term in the introductory
paragraph of this Agreement.
"BALANCE SHEET" and "BALANCE SHEET DATE" shall have the respective meanings
assigned to such terms in Section 3.04(a).
"BUSINESS DAY" shall mean any day excluding Saturday, Sunday or any day
which shall be in the State of New York a legal holiday or a day on which
banking institutions are authorized by law to close.
"BUYER" shall have the meaning assigned to such term in the introductory
paragraph of this Agreement.
"BUYER BALANCE SHEET" shall mean the unaudited balance sheet of Buyer as of
the Buyer Balance Sheet Date included in Buyer's quarterly report on Form 10-Q
for the fiscal quarter ended on the Buyer Balance Sheet Date.
"BUYER BALANCE SHEET DATE" shall mean December 31, 1997.
"BUYER COMMON STOCK" shall mean the Common Stock, par value $.01 per share,
of Buyer.
"BUYER ERISA AFFILIATE" shall mean any Person which is (or at any relevant
time was) a member of a controlled group of corporations within the meaning of
Code Section 414(b), all trades or businesses under common control within the
meaning of Code Section 414(c), and all affiliated service groups within the
meaning of Code Section 414(m), of which Buyer is (or at any relevant time was)
a member.
"BUYER LEASED PROPERTY" shall have the meaning assigned to such term in
Section 4.19.
"BUYER PLAN" shall mean any "employee benefit plan" within the meaning of
Section 3(3) of ERISA and any other written or oral employee benefit plan,
arrangement, practice, contract, policy, or program (other than arrangements
merely involving the payment of wages) which are or at any time have been
established, maintained, or contributed to by Buyer or any of its Subsidiaries
or any Buyer ERISA Affiliate for the benefit of current or former employees,
with respect to which Buyer or any of its Subsidiaries or a Buyer ERISA
Affiliate has or may in the future have any liability or obligation to
contribute or make payments of any kind.
"BUYER PREFERRED STOCK" shall mean the Preferred Stock, par value $.01 per
share, of Buyer.
"BUYER REPORTS" shall have the meaning assigned to such term in Section
4.06.
"CERTIFICATES" shall have the meaning assigned to such term in Section
2.08(a).
"CERTIFICATE OF MERGER" shall have the meaning assigned to such term in
Section 2.12.
"CLAIM NOTICE" shall have the meaning assigned to such term in Section
10.03(a).
"CLOSING" and "CLOSING DATE" shall have the respective meanings assigned to
such terms in Section 2.13.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMISSION" shall mean the United States Securities and Exchange
Commission.
"COMMITMENT LETTER" shall have the meaning assigned to such term in Recital
E.
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"COMMON STOCK" shall mean the common stock, par value $.001 per share, of
the Company.
"COMPANY" shall have the meaning assigned to such term in the introductory
paragraph of this Agreement.
"CONFIDENTIALITY AGREEMENT" shall have the meaning assigned to such term in
Section 8.03(b).
"CONSTITUENT CORPORATIONS" shall have the meaning assigned to such term in
Section 2.01.
"DAMAGES" shall mean any and all losses, liabilities, obligations, costs,
expenses, damages or judgments of any kind or nature whatsoever (including
reasonable attorneys', accountants' and experts' fees, disbursements of counsel,
and other costs and expenses incurred pursuing indemnification claims under
Article X hereof).
"DELAWARE LAW" shall mean the Delaware General Corporation Law, as amended.
"DISSENTERS' SHARES" shall have the meaning assigned to such term in Section
2.07(a).
"EFFECTIVE TIME" shall have the meaning assigned to such term in Section
2.02.
"ENVIRONMENTAL LAWS" shall mean all Legal Requirements pertaining to the
protection of the environment, the treatment, emission and discharge of gaseous,
particulate and effluent pollutants and the use, handling, storage, treatment,
removal, transport, transloading, cleanup, decontamination, discharge and
disposal of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA AFFILIATE" shall mean any Person which is (or at any relevant time
was) a member of a controlled group of corporations within the meaning of Code
Section 414(b), all trades or businesses under common control within the meaning
of Code Section 414(c), and all affiliated service groups within the meaning of
Code Section 414(m), of which the Company is (or at any relevant time was) a
member.
"ESCROW AGENT" shall mean Xxxxxx Trust and Savings Bank.
"ESCROW AGREEMENT" shall mean that certain Escrow Agreement to be executed
by the Escrow Agent, the Representative and Buyer at the Closing, in
substantially the form of Annex J hereto.
"ESCROW SHARES" shall have the meaning assigned to such term in Section
2.06(a).
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"EXCHANGE AGENT" shall mean Xxxxxx Trust and Savings Bank.
"EXCHANGE RATIO" shall have the meaning assigned to such term in Section
2.06(a).
"EXCHANGED OPTION SHARES" shall have the meaning assigned to such term in
Section 2.06(b).
"EXCHANGED WARRANT SHARES" shall have the meaning assigned to such term in
Section 2.06(c).
"FINANCIAL STATEMENTS" shall have the meaning assigned to such term in
Section 3.04(a).
"GAAP" means generally accepted accounting principles in the United States
consistently applied.
"GOVERNMENTAL ENTITY" shall mean any local, state, federal or foreign (i)
court, (ii) government or (iii) governmental department, commission,
instrumentality, board, agency or authority, including the IRS and other taxing
authorities.
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"HAZARDOUS MATERIAL" shall mean any flammable, ignitable, corrosive,
reactive, radioactive or explosive substance or material, hazardous waste, toxic
substance or related material and any other substance or material defined or
designated as a hazardous or toxic substance, material or waste by any
Environmental Law.
"HSR ACT" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"INDEBTEDNESS" shall mean, when used with reference to any Person, without
duplication, (i) any liability of such Person created or assumed by such Person,
or any Subsidiary thereof, (A) for borrowed money, (B) evidenced by a bond,
note, debenture or similar instrument (including a purchase money obligation,
deed of trust or mortgage) given in connection with the acquisition of, or
exchange for, any property or assets (other than inventory or similar property
acquired and consumed in the Ordinary Course), including securities and other
Indebtedness, (C) in respect of letters of credit issued for such Person's
account and interest rate swap agreements and currency exchange rate agreements
(and other interest and currency exchange rate hedging agreements) to which such
Person is a party or (D) for the payment of money as lessee under leases that
should be, in accordance with GAAP, recorded as capital leases for financial
reporting purposes; (ii) any liability of others described in the preceding
clause (i) guaranteed as to payment of principal or interest by such Person or
in effect guaranteed by such Person through an agreement, contingent or
otherwise, to purchase, repurchase or pay the related Indebtedness or to acquire
the security therefor; (iii) all liabilities or obligations secured by a Lien
(other than a Permitted Lien) upon property owned by such Person and upon which
liabilities or obligations such Person customarily pays interest or principal,
whether or not such Person has not assumed or become liable for the payment of
such liabilities or obligations; and (iv) any amendment, renewal, extension,
revision or refunding of any such liability or obligation; PROVIDED, HOWEVER,
that Indebtedness shall not include any liability for compensation of such
Person's employees or for inventory or similar property acquired and consumed in
the Ordinary Course or for services.
"INDEMNIFICATION CLAIM," "INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" shall
have the respective meanings assigned to such terms in Section 10.03(a).
"INITIAL SHARES" shall have the meaning assigned to such term in Section
2.06(a).
"IRS" shall mean the United States Internal Revenue Service.
"KNOWLEDGE" shall mean, with respect to the Company, the actual knowledge,
after due inquiry, of any of the officers or directors of the Company, and with
respect to Buyer, the actual knowledge, after due inquiry, of any of the
officers or directors of Buyer.
"LEASED REAL PROPERTY" shall have the meaning assigned to such term in
Section 3.21.
"LEGAL REQUIREMENT" shall mean any statute, law, ordinance, rule,
regulation, permit, order, writ, judgment, injunction, decree or award issued,
enacted or promulgated by any Governmental Entity or any arbitrator.
"LIEN" shall mean all liens (including judgment and mechanics' liens,
regardless of whether liquidated), mortgages, assessments, security interests,
easements, claims, pledges, trusts (constructive or other), deeds of trust,
options or other charges, encumbrances or restrictions.
"MATERIAL ADVERSE EFFECT" shall mean, with respect to the Company or the
Buyer, as applicable, a material adverse effect on the business, financial
condition, properties, profitability, business prospects or operations of the
Company and its Subsidiaries, or the Buyer and its Subsidiaries, as the case may
be, taken as a whole.
"MERGER" shall have the meaning assigned to such term in Recital B hereof.
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"MERGER SHARES" shall have the meaning assigned to such term in Section
2.06(a).
"NEWCO" shall have the meaning assigned to such term in the introductory
paragraph of this Agreement.
"NEW YORK LAW" shall mean the Business Corporation Law of the State of New
York.
"OPTIONS" shall mean all outstanding options, warrants and other rights to
acquire Common Stock.
"OPTION SHARES" shall have the meaning assigned to such term in Section
2.06(b).
"ORDINARY COURSE" shall mean, when used with reference to the Company or
Buyer, the ordinary course of the Company's or Buyer's business (including their
respective Subsidiaries), respectively, consistent with past practices.
"PERMITTED LIENS" shall mean (a) Liens for ad valorem real or personal
property taxes or assessments not at the time due and (b) Liens in respect of
pledges or deposits under workers' compensation laws or similar legislation,
carriers', warehousemen's, mechanics', laborers' and materialmen's, landlord's
and similar liens, if the obligations secured by such Liens are not then
delinquent.
"PERSON" shall mean any natural person, corporation, business trust,
association, company, partnership, limited liability company, joint venture,
Governmental Entity and any other entity.
"PLAN" shall mean any "employee benefit plan" within the meaning of Section
3(3) of ERISA and any other written or oral employee benefit plan, arrangement,
practice, contract, policy, or program (other than arrangements merely involving
the payment of wages) which are or at any time have been established,
maintained, or contributed to by the Company or any of its Subsidiaries or any
ERISA Affiliate for the benefit of current or former employees, with respect to
which the Company or any of its Subsidiaries or an ERISA Affiliate has or may in
the future have any liability or obligation to contribute or make payments of
any kind.
"PLAN OPTIONS" shall have the meaning assigned to such term in Section
2.06(b).
"PROXY STATEMENT/PROSPECTUS" shall have the meaning assigned to such term in
Section 5.01.
"REGISTRATION STATEMENT" shall have the meaning assigned to such term in
Section 5.01.
"REPRESENTATIVE" shall mean Xxxxxx Equity Investors III, L.P.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SHAREHOLDER" shall mean an owner of the Shares, as set forth in Annex A
hereto, as amended as of the Closing Date.
"SHAREHOLDERS AGREEMENT" shall mean a Shareholders Agreement to be entered
into at the Closing by Xxxxxx Equity Investors III, L.P., ITC Services Company,
Xxxxxx Xxxxx, The Xxxxxx Xxxxx 1995 Grantor Retained Annuity Trust, Codinvest
Limited, Xxxxxxx X. Xxxxxx and Xxxxxx X. Pounds in substantially the form of
Annex K hereto.
"SHARES" shall mean the issued and outstanding shares of Common Stock.
"STOCK PLANS" shall mean all stock option plans and other stock or
equity-related plans of the Company.
"SUBSIDIARY" of a Person shall mean any corporation, partnership,
association or other business entity at least 50% of the outstanding voting
power of which is at the time owned or controlled directly or indirectly by such
Person or by one or more of such subsidiary entities, or both.
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"SURVIVING CORPORATION" shall have the meaning assigned to such term in
Section 2.01 hereof.
"TAX" shall mean any Federal, state, local or foreign income, gross
receipts, license, payroll, unemployment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including, without limitation, taxes
under Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), employment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated tax or other tax, assessment or charge
of any kind whatsoever, including, without limitation, any interest, fine,
penalty or addition thereto, whether disputed or not.
"TAX RETURN" shall mean any return, declaration, report, claim for refund or
information, or statement relating to Taxes, and any exhibit, schedule,
attachment or amendment thereto.
"WARRANTS" shall have the meaning assigned to such term in Section 2.06(c).
"WARRANT SHARES" shall have the meaning assigned to such term in Section
2.06(c).
ARTICLE II
THE MERGER
SECTION 2.01 MERGER. Upon the terms and subject to the conditions of this
Agreement, Newco shall be merged with and into the Company in accordance with
the applicable provisions of the New York Law. The Company and Newco are herein
sometimes referred to as the "CONSTITUENT CORPORATIONS." At the Effective Time,
the identity and separate corporate existence of Newco shall cease and the
Company shall be the surviving corporation in the Merger (sometimes hereinafter
referred to as the "SURVIVING CORPORATION"). The Merger shall have the effects
set forth in Section 906 of the New York Law.
SECTION 2.02 EFFECTIVE TIME. The Merger shall become effective on the date
and at the time the Certificate of Merger referred to in Section 2.10 hereof is
filed with the Secretary of State of the State of New York in accordance with
Section 104 of the New York Law. The time at which the Merger shall become
effective as aforesaid is referred to hereinafter as the "EFFECTIVE TIME."
SECTION 2.03 CERTIFICATE OF INCORPORATION, BYLAWS, DIRECTORS AND OFFICERS,
NAME.
(a) The Certificate of Incorporation of Newco, as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation of
the Surviving Corporation, from and after the Effective Time until amended
in accordance with applicable law.
(b) The Bylaws of Newco, as in effect immediately prior to the Effective
Time, shall be the Bylaws of the Surviving Corporation from and after the
Effective Time until amended in accordance with applicable law, the
Surviving Corporation's Certificate of Incorporation and such Bylaws.
(c) The directors and officers of Newco in office immediately prior to
the Effective Time shall be the directors and officers of the Surviving
Corporation, and each shall hold his or her respective office or offices
from and after the Effective Time until his or her successor shall have been
elected and shall have qualified or as otherwise provided in the Bylaws of
the Surviving Corporation.
(d) The name of the Surviving Corporation from and after the Effective
Time shall be "IQI, Inc." until changed in accordance with applicable law.
SECTION 2.04 ASSETS AND LIABILITIES. At the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises of a
public as well as of a private nature, and be subject to all the restrictions,
disabilities and duties of each of the Constituent Corporations; and all the
rights, privileges, powers and franchises of each of the Constituent
Corporations, and all property, real, personal and mixed, and all debts due to
any of the Constituent Corporations on whatever account, as well
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as for stock subscriptions and all other things in action or belonging to each
of the Constituent Corporations, shall be vested in the Surviving Corporation;
and all property, rights, privileges, powers and franchises, and all and every
other interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of the several and respective Constituent Corporations,
and the title to any real estate vested by deed or otherwise under the laws of
any jurisdiction, in any of the Constituent Corporations, shall not revert or be
in any way impaired by this Article II; but all rights of creditors and all
liens upon any property of any of the Constituent Corporations shall be
preserved unimpaired, and all debts, liabilities and duties of the respective
Constituent Corporations shall thenceforth attach to the Surviving Corporation,
and may be enforced against it to the same extent as if said debts, liabilities
and duties had been incurred or contracted by it.
SECTION 2.05 FURTHER ASSURANCES. If, at any time after the Effective Date,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (i) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, properties or assets of the Constituent Corporations acquired or to
be acquired as a result of the Merger, or (ii) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of the Constituent Corporations, all such deeds, bills of
sale, assignments and assurances and do, in the name and on behalf of the
Constituent Corporations, all such other acts and things necessary, desirable or
proper to vest, perfect or confirm its right, title or interest in, to or under
any of the rights, properties or assets of the Constituent Corporations acquired
or to be acquired as a result of the Merger and otherwise to carry out the
purposes of this Agreement.
SECTION 2.06 CONVERSION OF SECURITIES.
(a) By virtue of the Merger and without any action on the part of the
holder thereof, at the Effective Time each share of Common Stock issued and
outstanding immediately prior to the Effective Time (other than Dissenters'
Shares and other than as provided in Section 2.06(d)) shall be converted
into the right to receive, and become exchangeable for, 9.7513 (the
"EXCHANGE RATIO") validly issued, fully paid and nonassessable shares of
Buyer Common Stock (collectively, the "MERGER SHARES"). If after the date
hereof and prior to the Effective Time Buyer shall have declared a stock
split (including a reverse split) of Buyer Common Stock or a dividend
payable in Buyer Common Stock, then the Exchange Ratio shall be
appropriately adjusted to reflect such stock split or dividend of
securities. At the Effective Time, the holders of Common Stock shall be
entitled to receive, in the aggregate, such number of shares of Buyer Common
Stock as is equal to the Merger Shares less the Escrow Shares. For the
purposes hereof, the "ESCROW SHARES" shall mean 1,506,092 shares of Buyer
Common Stock. The shares of Buyer Common Stock which the holders of Common
Stock shall be entitled to receive at the Effective Time are hereinafter
referred to as the "Initial Shares." The Escrow Shares shall be deposited
into escrow pursuant to Section 2.10 and shall be held and disposed of in
accordance with the terms of the Escrow Agreement.
(b) As of the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, each Option that is outstanding
under the Company's 1996 Incentive Stock Option Plan (each a "PLAN OPTION,"
and, collectively, the "PLAN OPTIONS") immediately prior to the Effective
Time shall be assumed by Buyer in such a manner that each such Plan Option
shall be exercisable upon the same terms and conditions as under the
Company's 1996 Incentive Stock Option Plan and the applicable Plan Option
agreement issued thereunder, except that (i) each such Plan Option shall be
exercisable for that number of shares of Buyer Common Stock (rounded up to
the nearest whole share) equal to the product of the number of shares of
Common stock subject to such Plan Option immediately prior to the Effective
Time multiplied by the Exchange Ratio (the "OPTION SHARES"), and (ii) the
Plan Option price per share of Buyer Common Stock shall be an amount equal
to the product of the Plan Option price per share of Common Stock subject to
such Plan Option immediately prior to
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the Effective Time divided by the Exchange Ratio (rounded up to the nearest
whole cent); PROVIDED, HOWEVER, that in the case of Plan Options intended to
qualify as "incentive stock options" pursuant to Section 422 of the Code,
any such adjustment shall be made in such manner as not to disqualify such
Plan Options as "incentive stock options." For purposes of this Agreement,
"EXCHANGED OPTION SHARES" shall mean the number of shares of Buyer Common
Stock as is equal to the aggregate number of Option Shares. As soon as
practicable after the Effective Time, Buyer shall file a registration
statement on Form S-8 (or any successor form) under the Securities Act with
respect to all of the Exchanged Option Shares that may be issued pursuant to
the Plan Options and shall use its best efforts to cause and maintain the
effectiveness of such registration statement.
(c) As of the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, each Option that is outstanding
(other than under the Company's 1996 Incentive Stock Option Plan) (each a
"WARRANT," and, collectively, the "WARRANTS") immediately prior to the
Effective Time shall be assumed by Buyer in such a manner that each such
Warrant shall be exercisable upon the same terms and conditions as under the
applicable Warrant agreement issued thereunder, except that (i) each such
Warrant shall be exercisable for that number of shares of Buyer Common Stock
(rounded up to the nearest whole share) equal to the product of the number
of shares of Common Stock subject to such Warrant immediately prior to the
Effective Time multiplied by a the Exchange Ratio (the "WARRANT SHARES"),
and (ii) the Warrant price per share of Buyer Common Stock shall be an
amount equal to the product of the Warrant price per share of Common Stock
subject to such Warrant immediately prior to the Effective Time divided by
the Exchange Ratio (rounded up to the nearest whole cent). For purposes of
this Agreement, "EXCHANGED WARRANT SHARES" shall mean the number of shares
of Buyer Common Stock as is equal to the aggregate number of Warrant Shares.
(d) By virtue of the Merger and without any action on the part of the
holder thereof, at the Effective Time each share of Common Stock held by the
Company as a treasury share immediately prior to the Effective Time shall be
canceled and no payment of any consideration shall be made with respect
thereto.
(e) By virtue of the Merger and without any action on the part of the
holder thereof, at the Effective Time each share of common stock of Newco
that is issued and outstanding immediately prior to the Effective Time shall
be converted into one newly issued share of common stock of the Surviving
Corporation, par value $.01 per share.
SECTION 2.07 DISSENTING SHARES.
(a) Each outstanding share of Common Stock held by Shareholders who
shall have properly perfected appraisal rights with respect thereto under
Section 623 of the New York Law ("DISSENTERS' SHARES") shall not be
converted into the right to receive the consideration specified in Section
2.06, but shall be entitled to receive payment of the fair value of such
shares of Common Stock in accordance with the provisions of Sections 623 and
910 of the New York Law, except that any Dissenters' Shares held by a
Shareholder who shall thereafter withdraw its, his or her demand for payment
of fair value of such shares of Common Stock in accordance with the
provisions of such Section 623, or lose its, his or her right to such
payment, shall be converted, as of the Effective Time, into the right to
receive the applicable consideration specified in Section 2.06.
(b) The Company shall give Buyer (i) prompt notice of any written
demands for payment of fair value of any shares of Common Stock, withdrawals
of such demands, and any other instruments that relate to such demands
received by the Company and (ii) the opportunity to direct all negotiations
and proceedings with respect to demands for payment of fair value of such
shares under New York Law. The Company shall not, except with the prior
written consent of Buyer, make any payment with respect to any demands for
appraisal of shares of Common Stock or offer to settle any such demands.
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SECTION 2.08 EXCHANGE OF SHARES.
(a) Prior to the Effective Time, Buyer shall appoint the Exchange Agent
to effect the exchange of Shares for Initial Shares. On the Closing Date,
Buyer shall deliver to the Exchange Agent, in trust for the benefit of the
Shareholders, a stock certificate (issued in the name of its Exchange Agent
or its nominee) representing the Initial Shares. Each holder of a
certificate or certificates (the "CERTIFICATES") which immediately prior to
the Effective Time represented outstanding shares of Common Stock will be
entitled to receive, upon surrender to the Exchange Agent of such
Certificates for cancellation, shares of Buyer Common Stock in the amount
calculated in accordance with Section 2.06 hereof. Until properly
surrendered, each such Certificate shall be deemed for all purposes to
evidence only the right to receive such shares of Buyer Common Stock and any
distributions paid to the holders of Buyer Common Stock after the Effective
Time.
(b) If any shares of Buyer Common Stock are to be issued to a Person
other than the Person in whose name the Certificates surrendered are
registered, it shall be a condition of such issuance that the Certificates
so surrendered shall be properly endorsed or otherwise in proper form for
transfer and that the Person requesting such transfer shall pay any transfer
or other taxes required by reason of the payment to a Person other than the
registered holder of the Certificates surrendered or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is
not applicable.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed, the Exchange
Agent shall issue in exchange for such lost, stolen or destroyed Certificate
the number of Initial Shares issuable in exchange therefor pursuant to
Section 2.06. Buyer may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
Certificate to give Buyer indemnity against, or post a bond for, any claim
that may be made against Buyer with respect to the Certificate alleged to
have been lost, stolen or destroyed.
(d) Prior to the Effective Time, Buyer will cause the Exchange Agent to
deliver or mail to each record holder of Certificates a form of letter of
transmittal (which will specify that delivery will be effected, and risk of
loss will pass, only upon proper delivery of the Certificates to the
Exchange Agent) and instructions for use in effecting surrender of
Certificates for payment therefor.
(e) From and after the Effective Time, the holders of shares of Common
Stock outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such shares of Common Stock, except as
otherwise provided herein or by law.
(f) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any shares of Common Stock
which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation,
they shall be canceled and promptly exchanged for Initial Shares as provided
in this Section 2.08, or subject to applicable law in the case of
Dissenters' Shares.
(g) If the holder of any shares of Common Stock shall become entitled to
receive payment for such shares pursuant to Section 910 of the New York Law,
such payment shall be made by the Surviving Corporation.
(h) No certificates or scrip representing fractional shares of Buyer
Common Stock shall be issued to the Shareholders upon the surrender for
exchange of Certificates. In lieu of any fractional shares of Buyer Common
Stock that would otherwise be issued, each Shareholder that would have been
entitled to receive a fractional share of Buyer Common Stock shall, upon
proper surrender of such person's Certificates, receive one share of Buyer
Common Stock for such fractional share.
(i) No dividends or distributions that are declared on shares of Buyer
Common Stock will be paid to persons entitled to receive certificates
representing shares of Buyer Common Stock hereunder
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until such persons surrender their Certificates. Upon such surrender, there
shall be paid to the person in whose name the Certificates representing such
shares of Buyer Common Stock shall be issued, any dividends or distributions
with respect to such shares of Buyer Common Stock which have a record date
after the Effective Time and shall have become payable between the Effective
Time and the time of surrender. In no event will the Person entitled to
receive such dividends or distributions be entitled to receive interest
thereon.
SECTION 2.09 REQUISITE SHAREHOLDER APPROVAL.
(a) The Company will take all action necessary in accordance with
applicable law and its Certificate of Incorporation and Bylaws to convene a
special meeting of the Shareholders to consider and vote upon, or solicit
the written consent of the Shareholders for, the approval of the Merger and
adoption of this Agreement. The Company hereby represents and warrants to
Buyer and Newco that the approval of the Merger and the adoption of this
Agreement will require, under the New York Law and the Company's Certificate
of Incorporation, the approval of the holders of a majority of the
outstanding Shares.
(b) The Buyer will take all action necessary in accordance with
applicable law and its Certificate of Incorporation and Bylaws to convene a
special meeting of the stockholders of the Buyer to consider and vote upon
the approval of the Merger and adoption of this Agreement. The Buyer hereby
represents and warrants to the Company that the adoption of this Agreement
will require under the Delaware Law, the rules of the NASDAQ National Stock
Market and Buyer's Certificate of Incorporation, the approval of the holders
of a majority of the outstanding Buyer Common Stock, voting as a single
class.
SECTION 2.10 ESCROW. On the Closing Date, Buyer shall deliver to the
Escrow Agent a certificate (issued in the name of the Escrow Agent or its
nominee) representing the Escrow Shares, for the purpose of securing the
indemnification obligations of the Shareholders set forth in Article X of this
Agreement. The Escrow Shares shall be held by the Escrow Agent under the Escrow
Agreement pursuant to the terms thereof. The Escrow Shares shall be held as a
trust fund and shall not be subject to any lien, attachment, trustee process or
other judicial process of any creditor of any party, and shall be held and
disbursed solely for the purposes, and in accordance with the terms, of the
Escrow Agreement. The adoption of this Agreement and the approval of the Merger
by the Shareholders shall constitute approval of the Escrow Agreement and all of
the arrangements relating thereto, including without limitation the placement of
the Escrow Shares in escrow and the appointment of the Representative.
SECTION 2.11 REPRESENTATIVE. In order to efficiently administer the
transactions contemplated hereby, including (i) the defense and/or settlement of
any claims for which the Shareholders may be required to indemnify Buyer
pursuant to Article X hereof and (ii) entering into the Escrow Agreement, the
Shareholders, by their adoption of this Agreement and the approval of the
Merger, agree to the appointment of the Representative. The Representative is
hereby authorized to take any and all action as is contemplated to be taken by
the Shareholders by the terms of this Agreement and the Escrow Agreement. All
decisions and actions by the Representative shall be binding upon all of the
Shareholders and no Shareholder shall have the right to object, dissent, protest
or otherwise contest the same. By their adoption of this Agreement and the
approval of the Merger, the Shareholders further agree that:
(a) Buyer shall be able to rely exclusively on the instructions and
decisions of the Representative as to the settlement of claims for
indemnification by Buyer pursuant to Article X hereof, or any other actions
taken by the Representative hereunder, and no party hereunder shall have any
cause of action against Buyer in reliance upon the instructions or decisions
of the Representative;
(b) all actions, decisions and instructions of the Representative shall
be final, conclusive and binding upon the Shareholders;
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(c) the provisions of this Section 2.11 are independent and severable,
are irrevocable and coupled with an interest, and shall be enforceable
notwithstanding any rights or remedies that any Shareholder may have in
connection with the transactions contemplated by this Agreement and the
Escrow Agreement; and
(d) the provisions of this Section 2.11 shall be binding upon the
executors, heirs, legal representatives and successors of each Shareholder,
and any references in this Agreement to a Shareholder shall mean and include
the successors to the Shareholders' rights hereunder, whether pursuant to
testamentary disposition, the laws of descent and distribution or otherwise.
SECTION 2.12 CONSUMMATION OF MERGER. As soon as practicable after
satisfaction of the conditions set forth in Article VI hereof, the Company and
Newco shall execute and deliver to the Secretary of State of New York a duly
executed and verified Certificate of Merger (the "CERTIFICATE OF MERGER"), and
the parties shall take all such other and further actions as may be required by
law to make the Merger effective.
SECTION 2.13 CLOSING. The closing of the Merger and the other transactions
contemplated hereby (the "CLOSING") shall take place at the offices of Paul,
Hastings, Xxxxxxxx & Xxxxxx LLP, Thirty-First Floor, 000 Xxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 (or such other place as the parties may agree), at 10:00 A.M.
local time on June 30, 1998, or, if all conditions appearing in Article VI
hereof to the obligations of the parties hereto to consummate the transactions
contemplated hereby have not been satisfied or waived by such date, as promptly
as practicable upon satisfaction of such conditions as Buyer and the Company may
mutually establish (such time and date being referred to herein as the "CLOSING
DATE").
SECTION 2.14 ACTIONS AT THE CLOSING. At the Closing:
(a) The Company shall deliver or cause to be delivered to Buyer and
Newco all of the documents, certificates and instruments required to be
delivered to Buyer or Newco pursuant to Section 6.01 or 6.02.
(b) Buyer and Newco shall deliver or caused to be delivered to the
Company all of the documents, certificates and instruments required to be
delivered to the Company pursuant to Section 6.01 or 6.03.
(c) The Company and Newco shall file the Certificate of Merger with the
Secretary of State of the State of New York.
(d) Buyer shall deliver to the Exchange Agent certificates representing
the Initial Shares.
(e) Buyer, the Representative and the Escrow Agent shall enter into the
Escrow Agreement, and Buyer shall deliver to the Escrow Agent a certificate
representing the Escrow Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
REGARDING THE COMPANY
The Company hereby represents and warrants to, and covenants and agrees
with, Buyer and Newco that:
SECTION 3.01 ORGANIZATION AND GOOD STANDING; AUTHORIZATION.
(a) Each of the Company and its Subsidiaries has been duly organized and
is existing as a corporation in good standing under the laws of its
jurisdiction of incorporation with full power and authority (corporate and
other) to own and lease its properties and to conduct its business as
currently conducted. Each of the Company and its Subsidiaries has been duly
qualified as a foreign corporation
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for the transaction of business and is in good standing under the laws of
each jurisdiction in which the nature of its business or location of its
properties requires such qualification and in which the failure to so
qualify would have a Material Adverse Effect on the Company.
(b) The Company has the corporate power and authority to execute and
deliver this Agreement, to consummate the transactions contemplated hereby
and to perform its obligations under this Agreement. The execution and
delivery by the Company of this Agreement, and the consummation by the
Company of the transactions contemplated hereby, have been duly authorized
by all necessary corporate action by the Company, subject to obtaining the
requisite shareholder approval. This Agreement, upon its execution and
delivery by the Company (assuming the due authorization, execution and
delivery hereof by the other parties hereto), will constitute the legal,
valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms.
SECTION 3.02 NO CONFLICTS. Except as set forth on Schedule 3.02, subject
to compliance with the applicable requirements of the Securities Act and any
applicable state securities laws, the HSR Act and the filing of the Certificate
of Merger as required by the New York Law, the execution, delivery and
performance of this Agreement and the consummation by the Company of the
transactions contemplated hereby will not (a) conflict with or result in a
breach or violation of any term or provision of, or constitute a default under
(with or without notice or passage of time, or both), or otherwise give any
Person a basis for accelerated or increased rights or termination or
nonperformance under, any indenture, mortgage, deed of trust, loan or credit
agreement, lease, license or other agreement or instrument to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound or affected or to which any of the property or assets of
the Company or any of its Subsidiaries is bound or affected, (b) result in the
violation of the provisions of the Certificate of Incorporation or Bylaws of the
Company or any Legal Requirement applicable to or binding upon the Company or
any of its Subsidiaries, (c) result in the creation or imposition of any Lien
upon any property or asset of the Company or any of its Subsidiaries or (d)
otherwise adversely affect the contractual or other legal rights or privileges
of the Company or any of its Subsidiaries. Schedule 3.02 set forth a list of all
agreements to which the Company or any of its Subsidiaries is a party requiring
the consent of any party thereto to any of the transactions contemplated hereby.
SECTION 3.03 CAPITALIZATION. The authorized capital stock of the Company
consists solely of (A) 4,000,000 shares of Common Stock, of which 3,089,006 are,
and immediately prior to the Effective Time (other than those resulting from any
exercised Options between the date hereof and the Effective Time) will be,
issued and outstanding, and (B) 1,000,000 shares of preferred stock, par value
$.001 per share, of which no shares are, and immediately prior to the Effective
Time will be, issued and outstanding. Annex A hereto sets forth a complete and
accurate list of (i) the Shareholders, indicating the type and number of Shares
held by each Shareholder, (ii) all holders of Options, indicating the type and
number of shares of Common Stock subject to each Option, the name of the plan
and the vesting schedule and the exercise price thereof, and (iii) all of the
Stock Plans. All of the issued and outstanding shares of Common Stock are, and
all shares of Common Stock that may be issued upon exercise of Options after the
date hereof and prior to the Effective Time will be, duly authorized, validly
issued, fully paid, nonassessable and free of all preemptive rights. Other than
as set forth on Annex A (i) there are no existing options, warrants, rights,
calls or commitments of any character relating to shares of Common Stock, (ii)
there are no outstanding securities or other instruments convertible into or
exchangeable for shares of the Company's capital stock and no commitments to
issue such securities or instruments and (iii) no Person has any right of first
refusal, preemptive right, subscription right or similar right with respect to
any shares of the Company's capital stock. The offer, issuance and sale of the
Shares were (i) exempt from the registration and prospectus delivery
requirements of the Securities Act, (ii) registered or qualified (or exempt from
registration or qualification) under the registration or qualification
requirements of all applicable state securities laws and (iii) accomplished in
conformity with all other Legal Requirements. Except as set forth on Schedule
3.03, there are no voting agreements, voting trusts or similar arrangements or
understandings
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to which the Company or any of its Subsidiaries is a party or is bound with
respect to the voting of the capital stock of the Company or its Subsidiaries.
Except as set forth in Schedule 3.03, none of the awards, grants or other
agreements pursuant to which Company stock options or warrants were issued have
provisions which accelerate the vesting or right to exercise such options or
warrants upon the execution of this Agreement, the consummation of the
transactions contemplated by this Agreement or any "change of control" events.
SECTION 3.04 FINANCIAL STATEMENTS.
(a) Schedule 3.04(a) contains true and complete copies of (i) the
unaudited balance sheet of the Company (the "BALANCE SHEET") at December 31,
1997 (the "BALANCE SHEET DATE"), and the related unaudited statements of
income, shareholders' equity and cash flows for the year then ended, and
(ii) the audited balance sheet of the Company at December 31, 1996, and the
related audited statements of income, shareholders' equity and cash flows
for the year then ended, together with the opinion thereon of Ernst & Young
LLP, the Company's independent accountants (the financial statements
described in this subparagraph (a) collectively, the "FINANCIAL
STATEMENTS").
(b) The Financial Statements present fairly the financial condition of
the Company as of the Balance Sheet Date and the results of operations and
changes in financial position of the Company for the years then ended, have
been prepared in conformity with GAAP during the period covered thereby and
prior periods, have been derived from the accounting records of the Company
and represent only actual, bona fide transactions. Since December 31, 1997,
there has been no change in accounting (including tax accounting) policies,
practices or procedures of the Company or any of its consolidated
Subsidiaries. The Company is neither aware of, nor does it anticipate, any
material audit adjustments to its financial statements for the year ended
December 31, 1997.
SECTION 3.05 INDEBTEDNESS. Neither the Company nor any of its Subsidiaries
has any liability or obligation for Indebtedness other than as set forth on
Schedule 3.05, and true and complete copies of all instruments and documents
evidencing, creating, securing or otherwise relating to such Indebtedness have
been delivered to Buyer heretofore. Except as described in Schedule 3.05, no
event has occurred and no condition has become known to the Company (including
the transactions contemplated hereby) that constitutes or, with notice or
passage of time, or both, would constitute a default or a basis of force majeure
or other claim of accelerated or increased rights, termination, excusable delay
or nonperformance by the Company or any other Person under any instrument or
document relating to or evidencing Indebtedness that would entitle any Person to
require the Company or any of its Subsidiaries to pay any portion of the
principal amount of such Indebtedness prior to the scheduled maturity thereof.
Except as set forth in Schedule 3.05, no instrument or document evidencing,
creating, securing or otherwise relating to Indebtedness of the Company or any
of its Subsidiaries will require the consent of any Person to or as a result of
the consummation of the transactions contemplated by this Agreement.
SECTION 3.06 JUDGMENTS; LITIGATION. Except as set forth on Schedule 3.06:
(a) There is no (i) outstanding judgment, order, decree, award,
stipulation, injunction of any Governmental Entity or arbitrator against or
affecting the Company or any of its Subsidiaries or their respective
properties, assets or businesses or (ii) Action pending against or affecting
the Company or any of its Subsidiaries or their respective properties,
assets or businesses.
(b) To the Company's knowledge, there is no (i) outstanding judgment,
order, decree, award, stipulation, injunction of any Governmental Entity or
arbitrator against or affecting any officer, director or employee of the
Company or any of its Subsidiaries relating to the Company or any of its
Subsidiaries or their respective businesses, (ii) Action threatened against
the Company or any of its Subsidiaries or their respective properties,
assets or businesses, (iii) Action pending or threatened against the
Company's or any of its Subsidiaries' officers, directors or employees
relating to the Company or any of its Subsidiaries or their respective
businesses or (iv) basis for the institution of any
A-13
Action against the Company or any of its Subsidiaries or their respective
officers, directors, employees, properties or assets which, if decided
adversely, would have a Material Adverse Effect on the Company.
SECTION 3.07 CORPORATE RECORDS. The copies or originals of the Certificate
of Incorporation or Articles of Incorporation, Bylaws, minute books and stock
records of the Company and its Subsidiaries previously delivered to, or made
available for inspection by, Buyer are true, complete and correct.
SECTION 3.08 EMPLOYEE BENEFIT MATTERS.
(a) Schedule 3.08(a) is a complete list of all Plans. True and complete
copies of each of the following documents (and any amendments thereto),
where applicable, have been delivered previously to Buyer: (i) the Plan
documents; (ii) a written description of any Plan which is not in writing;
(iii) if the Plan is funded through a trust or any third-party funding
vehicle, the trust or other funding agreement; (iv) the Plan's most recent
financial statements; (v) the two most recent annual reports (including all
schedules and attachments thereto) required by ERISA; (vi) the most recent
actuarial report and valuation; (vii) the most recent determination letter
received from the IRS with respect to each Plan that is intended to be
qualified under Code Section 401 or to be recognized as tax-exempt under
Code Section 501(c); (viii) the most recent summary plan description and
each summary of material modifications required by ERISA; (ix) any agreement
providing for the provision of administrative or investment management
services with respect to the Plan; and (x) all documents and correspondence
received from or provided to the Department of Labor, IRS, and Pension
Benefit Guaranty Corporation during the past two years.
(b) Each Plan and related trust, annuity, or other funding agreement
complies and has been maintained in compliance with all applicable Legal
Requirements. No non-exempt prohibited transaction (as defined in Code
Section 4975 and ERISA Sections 406 and 408) has occurred and no "fiduciary"
(as defined in ERISA Section 3(21)) has committed any breach of duty which
could subject the Company, any ERISA Affiliate, or any director, officer, or
employee thereof to liability under Title I of ERISA or to tax under Code
Section 4975. All material obligations required to be performed by the
Company and any other Person under the terms of each Plan and applicable
Legal Requirements have been performed.
(c) All required reports and descriptions, including, without
limitation, annual reports (Form 5500), summary annual reports, and summary
plan descriptions, have been filed and distributed timely. With respect to
each Plan which is a welfare plan (as defined in ERISA Section 3(1)), the
requirements of Part 6 of Subtitle B of Title I of ERISA and of Code
Sections 162(k) and 4980B have been satisfied.
(d) All contributions, premiums, and other payments, including, without
limitation, employer contributions and employee salary reduction
contributions, have been paid when due or accrued in accordance with the
past custom and practice of the Company and any ERISA Affiliate. No Plan
that is subject to Part 3 of Subtitle B of Title I of ERISA or to Code
Section 412 has incurred any accumulated funding deficiency, whether or not
waived, and no other actual or contingent liability for any other expenses
or obligations of any Plan exists.
(e) There are no pending or, to the Company's knowledge, threatened
Actions (other than routine claims for benefits) asserted or instituted
against any Plan or the assets of any Plan, or against the Company, or any
ERISA Affiliate, trustee, administrator, or fiduciary of such Plan, and the
Company has no knowledge of any facts that could form the basis of any such
Action.
(f) The Company (or, if applicable, an ERISA Affiliate) may terminate,
suspend, or amend each Plan at any time, except to the extent otherwise
required by Code Section 4980B, without the consent of the participants or
employees covered by such Plan. Neither the Company nor any ERISA Affiliate
has announced any intention, made any amendment or binding commitment, or
given any
A-14
written or oral notice providing that the Company or an ERISA Affiliate (i)
will create additional Plans covering employees of the Company or any ERISA
Affiliate, (ii) will increase benefits promised or provided pursuant to any
Plan, or (iii) will not exercise after the Closing Date any right or power
it may have to terminate, suspend, or amend any Plan.
(g) Neither the Company nor any ERISA Affiliate maintains or has
maintained at any time, or contributes to or has contributed to or is or was
required to contribute to, any (i) Plan subject to Title IV of ERISA,
including, without limitation, any multi-employer plan (as defined in ERISA
Section 3(37)), within the past five years, or (ii) funded or unfunded
medical, health, accident, or life insurance plan or arrangement for current
or future retirees or terminated employees or their spouses or dependents
(except to the extent required by Code Sections 162(k) or 4980B).
(h) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will constitute a
termination of employment or other event entitling any Person to any
additional or other benefits, or that would otherwise modify benefits or the
vesting of benefits, provided under any Plan.
(i) No event has occurred which could subject the Company or any ERISA
Affiliate to any material liability (i) under any Legal Requirement relating
to any Plan, or (ii) resulting from any obligation of the Company or an
ERISA Affiliate to indemnify any Person against liability incurred with
respect to or in connection with any Plan.
(j) Each Plan which is intended to be qualified under Code Section 401
has received, within the last three years, a favorable determination letter
from the IRS. No event has occurred and no facts or circumstances exist
which may cause or result in the loss or revocation of such determination.
(k) There are no material unfunded liabilities with respect to any Plan,
and each Plan could be terminated as of the date of the Closing with no
liability to Buyer, the Company or any ERISA Affiliate.
(l) There are no agreements of the Company or any of its Subsidiaries
which will or may provide payments to any officer, employee, shareholder, or
highly compensated individual of the Company or any of its Subsidiaries
which will be "parachute payments" under Code Section 280G that are
nondeductible to the Company or its Subsidiaries or subject to tax under
Code Section 4999 for which the Company or any ERISA Affiliate would have
withholding liability.
SECTION 3.09 INCOME AND OTHER TAXES. Except as set forth on Schedule 3.09:
(a) All Tax Returns required to be filed through and including the date
hereof in connection with the operations of the Company are true, complete
and correct in all respects and have been properly and timely filed. The
Company has not requested any extension of time within which to file any Tax
Return, which Tax Return has not since been filed. Buyer has heretofore been
furnished by the Company with true, correct and complete copies of each Tax
Return of the Company with respect to the past three taxable years, and of
all reports of, and communications from, any Governmental Entities relating
to such period. The Company has disclosed on its Federal income Tax Returns
all positions taken therein that could give rise to a substantial
understatement of income Taxes for federal income tax purposes within the
meaning of Code Section 6662.
(b) All Taxes required to be paid or withheld and deposited through and
including the date hereof in connection with the operations of the Company
have been duly and timely paid or deposited by the Company. The Company has
properly withheld or collected all amounts required by law for income Taxes,
employment Taxes and withholding Taxes relating to its employees, creditors,
independent contractors and other third parties, and for Taxes on sales, and
has properly and timely remitted such withheld or collected amounts to the
appropriate Governmental Entity. The Company has no liabilities for any
Taxes for any taxable period ending prior to or coincident with the Closing
Date.
A-15
(c) The Company has made adequate provision on its books of account for
all Taxes with respect to its business, properties and operations through
the Balance Sheet Date, and the accruals for Taxes in the Balance Sheet are
adequate to cover all liabilities for Taxes of the Company for all periods
ending on or before the Closing Date.
(d) The Company has not heretofore (i) had a tax deficiency proposed,
asserted or assessed against it, (ii) executed any waiver of any statute of
limitations on the assessment or collection of any Taxes, or (iii) been
delinquent in the payment of any Taxes.
(e) No Tax Return of the Company has been audited or the subject of
other Action by any Governmental Entity. The Company has not received any
notice from any Governmental Entity of any pending examination or any
proposed deficiency, addition, assessment, demand for payment or adjustment
relating to or affecting the Company or its assets or properties, and the
Company has not any reason to believe that any Governmental Entity may
assess (or threaten to assess) any Taxes for any periods ending on or prior
to the Closing Date.
(f) The Company (i) has not filed any consent or agreement pursuant to
Code Section 341(f), and no such consent or agreement will be filed at any
time on or before the Closing Date; (ii) has not made any payments, is not
obligated to make any payments and is not a party to any agreement that
under certain circumstances could obligate the Company to make any payments
that will not be deductible under Code Section 280G; (iii) is not a United
States real property holding corporation within the meaning of Code Section
897(c)(2); (iv) is not a party to a tax allocation or sharing agreement; (v)
has never been (or does not have any liability for unpaid Taxes because it
was) a member of an affiliated group with the meaning of Code Section
1504(a); (vi) has never applied for a tax ruling from a Governmental Entity;
(vii) has never filed or been the subject of an election under Code Section
338(g) or Code Section 338(h)(10) or caused or been the subject of a deemed
election under Code Section 338(e); (viii) has not participated in, or
cooperated with, an international boycott within the meaning of Section 999
of the Code; and (ix) has not issued or assumed any acquisition indebtedness
as defined in Section 279(b) of the Code.
(g) Set forth on Schedule 3.09(g) is the amount, as of the most recent
practicable date, of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax or excess charitable
contribution.
SECTION 3.10 HAZARDOUS MATERIALS. Except as set forth on Schedule 3.10:
(a) To the Company's knowledge, no Hazardous Material (i) has been
released, placed, stored, generated, used, manufactured, treated, deposited,
spilled, discharged, released or disposed of on or under any real property
currently or previously owned or leased by the Company or any of its
Subsidiaries, (ii) is presently maintained, used, generated, or permitted to
remain in place by the Company or any of its Subsidiaries in violation of
any Environmental Law, (iii) is required by any Environmental Law to be
eliminated, removed, treated or mitigated by the Company or any of its
Subsidiaries, given the nature of its present condition, location, nature,
material or maintenance, or (iv) is of a type, location, material, nature or
condition which requires special notification to third parties by the
Company or any of its Subsidiaries under Environmental Law or common law, in
any such cases which would have a Material Adverse Effect on the Company.
(b) No notice, citation, summons or order has been received by the
Company or any of its Subsidiaries, no notice has been given by the Company
or any of its Subsidiaries and no complaint has been filed, no penalty has
been assessed and no investigation or review is pending or, to the Company's
knowledge, threatened by any Governmental Entity, with respect to (i) any
alleged violation by the Company or any of its Subsidiaries of any
Environmental Law, or (ii) any alleged failure by the Company or any of its
Subsidiaries to have any environmental permit, certificate, license,
approval, registration or authorization required in connection with its
business or properties,
A-16
or (iii) any use, possession, generation, treatment, storage, recycling,
transportation, release or disposal by or on behalf of the Company or any of
its Subsidiaries of any Hazardous Material.
(c) Neither the Company nor any of its Subsidiaries has received any
request for information, notice of claim, demand or notification that it is
or that indicates that it may be a "potentially responsible party" with
respect to any investigation or remediation of any threatened or actual
release of any Hazardous Material.
(d) No above-ground or underground storage tanks, whether or not in use,
are or have ever been located at any property currently owned or leased by
the Company or any of its Subsidiaries.
(e) No notice has been received by the Company or any of its
Subsidiaries with respect to the listing or proposed listing of any property
currently or previously owned, operated or leased by the Company or any of
its Subsidiaries on the National Priorities List promulgated pursuant to
CERCLA, CERCLIS or any similar state list of sites requiring investigation
or cleanup.
(f) There have been no environmental inspections, investigations,
studies, tests, reviews or other analyses conducted in relation to any real
property currently owned or leased by the Company or any of its
Subsidiaries.
(g) Neither the Company nor any of its Subsidiaries has released,
transported, or arranged for the transportation of any Hazardous Material
from any property currently or previously owned, operated or leased by the
Company or any of its Subsidiaries.
SECTION 3.11 ACCOUNTS RECEIVABLE. All accounts receivable of the Company
reflected in the Balance Sheet and all accounts receivable of the Company that
have arisen since the Balance Sheet Date (except such accounts receivable as
have been collected since such date) are valid and enforceable claims against
the account debtor, and the goods and services sold and delivered that gave rise
to such accounts were sold and delivered in conformity with all applicable
express and implied warranties, purchase orders, agreements and specifications.
Such accounts receivable of the Company are subject to no valid defense, offset
or counterclaim and are fully collectible in the Ordinary Course, except to the
extent of the allowance for doubtful accounts reflected on the Balance Sheet.
SECTION 3.12 MATERIAL CONTRACTS. All material contracts, leases,
agreements and arrangements to which the Company or any of its Subsidiaries is a
party are legally valid, binding and enforceable in accordance with their terms
and in full force and effect, and the Company has provided Buyer with the
opportunity to review and copy all such documents. The Company and, to the
knowledge of the Company, all parties to such contracts, leases, agreements and
arrangements have complied with the provisions of such contracts, leases,
agreements and arrangements, and neither the Company nor any of its Subsidiaries
and, to the knowledge of the Company, no other party is, in default thereunder,
and no event has occurred which, but for the passage of time or the giving of
notice or both, would constitute a default thereunder. Set forth on Schedule
3.12 is a list of all such material contracts, leases, agreements and
arrangements, including those contracts to which the Company or any of its
Subsidiaries is a party which cannot be terminated or do not terminate within 12
months or less without cause or obligate the Company or any of its Subsidiaries
for amounts in excess of $50,000.00. Except as set forth on Schedule 3.12, none
of such contracts or agreements will, by its terms, terminate as a result of the
transactions contemplated hereby or require any consent from any obligor thereto
in order to remain in full force and effect immediately after the Effective
Time.
SECTION 3.13 NO UNDISCLOSED LIABILITIES. Except (i) to the extent set
forth or provided for in the Balance Sheet, (ii) as set forth on Schedule 3.13
or (iii) for non-material current liabilities incurred since the Balance Sheet
Date in the Ordinary Course, as of the date hereof the Company and its
Subsidiaries have no liabilities, whether accrued, absolute, contingent or
otherwise, whether due or to become due and whether the amounts thereof are
readily ascertainable or not, or any unrealized or anticipated losses from any
commitments of a contractual nature.
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SECTION 3.14 CONSENTS. No consent, approval, authorization, license,
permit or other action by, or filing with, any governmental or regulatory
authority is required in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated hereby, except for such consents, approvals, authorizations,
licenses, permits, actions or filings as will have been obtained, taken or filed
at or prior to the Closing.
SECTION 3.15 ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date,
neither the Company nor any of its Subsidiaries has made or suffered any change
in, or condition affecting, their respective condition (financial or otherwise),
properties, profitability, prospects or operations other than changes, events or
conditions in the Ordinary Course, none of which (individually or in the
aggregate) has had, or which the Company can now reasonably foresee will have, a
Material Adverse Effect on the Company.
SECTION 3.16 AFFILIATIONS. Except as disclosed on Schedule 3.16, none of
the officers, directors or key employees of the Company or any of its
Subsidiaries or any associate or Affiliate of the Company or any of such Persons
has, directly or indirectly, (i) an interest in any Person that (A) furnishes or
sells, or proposes to furnish or sell, services or products that are furnished
or sold by the Company or any of its Subsidiaries or (B) purchases from or sells
or furnishes to, or proposes to purchase from or sell or furnish to, the Company
or any of its Subsidiaries any goods or services or (ii) a beneficial interest
in any contract or agreement to which the Company or any of its Subsidiaries is
a party or by which the Company or any of its Subsidiaries or any of the assets
of the Company or any of its Subsidiaries are bound or affected.
SECTION 3.17 BROKERS' FEES. No broker, finder or similar agent has been
employed by or on behalf of the Company in connection with this Agreement or the
transactions contemplated hereby, and the Company has not entered into any
agreement or understanding of any kind with any person or entity for the payment
of any brokerage commission, finder's fee or any similar compensation in
connection with this Agreement or the transactions contemplated hereby.
SECTION 3.18 SEVERANCE ARRANGEMENTS. Except as set forth on Schedule 3.18,
neither the Company nor any of its Subsidiaries is subject to any agreement with
any employee (i) the benefits of which (including severance benefits) are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction of the nature of that contemplated by this Agreement or the
Merger, or (ii) providing for severance benefits beyond those described in
Schedule 3.18, or which are conditioned upon a change in control of the Company,
after the termination of employment of such employee regardless of the reason
for such termination of employment, and neither the Company nor any of its
Subsidiaries is a party to any employment agreement or compensation guarantee
for a period longer than one year from the date hereof. Schedule 3.18 sets forth
all employment agreements and compensation guarantees, regardless of duration,
to which the Company or any of its Subsidiaries is a party.
SECTION 3.19 SUBSIDIARIES. All the Company's Subsidiaries are set forth on
Schedule 3.19. Except as set forth on Schedule 3.19, the Company does not own
any shares of capital stock, partnership interests or other beneficial ownership
interests in any other Person.
SECTION 3.20 TITLE TO AND CONDITION OF ASSETS. Except as otherwise set
forth on Schedule 3.20 and except for assets and properties that are leased by
the Company or its Subsidiaries, the Company and its Subsidiaries hold good and
marketable title to their respective assets and properties, free and clean of
all Liens, except Permitted Liens. The assets and properties of the Company and
its Subsidiaries consisting of structures, fixtures and equipment are
structurally sound with no material defects and are in sufficient operating
order, condition and repair, ordinary wear and tear excepted, for the operation
of the Company's business as currently conducted, and none of such structures,
fixtures or equipment are in need of maintenance or repairs except for ordinary,
routine maintenance and repairs consistent with the age and use of such assets
and properties, which are not, either individually or in the aggregate,
material.
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SECTION 3.21 LEASED REAL PROPERTY.
(a) Schedule 3.21 describes the real property currently leased by the
Company or any of its Subsidiaries (the "LEASED REAL PROPERTY").
(b) Neither the Company nor any of its Subsidiaries owns any real
property. The Company and its Subsidiaries have good leasehold interests in,
and possession of, all Leased Real Property, subject to the terms of the
applicable leases. All of the leases for Leased Real Property are valid,
binding and in full force and effect, and there has been no breach, which
breach has not been cured or waived, of any such lease by the Company, or to
the Company's knowledge, the lessors thereunder.
(c) To the Company's knowledge, no fact or condition exists which could
result in the termination or reduction of the current access to or from the
Leased Real Property to existing roads or the electrical, telephone, sewer
or other utility services presently serving the Leased Real Property.
(d) To the Company's knowledge, the Leased Real Property is properly
zoned for its current use or uses, and there are presently no Legal
Requirements applicable to any parcel of Leased Real Property which prohibit
the use of such Leased Real Property for such purpose or purposes.
(e) No written notices have been received by the Company or its
Subsidiaries from any insurance company issuing any policy of insurance
covering the Leased Real Property regarding the performance of any work,
restoration or repair with respect to the Leased Real Property with which
compliance, to the satisfaction of such insurance company, has not been
made.
(f) To the Company's knowledge, the Leased Real Property is not subject
to any current use or special use assessment or any ad valorem tax
abatement.
(g) To the Company's knowledge, with respect to the improvements on the
Leased Real Property, such improvements are in conformity in all material
respects with all applicable Legal Requirements and no variances or other
waivers were obtained or are required to assure such conformity.
SECTION 3.23 COMPLIANCE WITH LAW. The Company and its Subsidiaries are in
compliance in all material respects with all Legal Requirements in connection
with the operation of their businesses and the ownership and maintenance of
their assets and properties. To the Company's knowledge, all filings and notices
required to be made by the Company and its Subsidiaries with any Governmental
Entity in connection with the operation of their businesses or the ownership and
maintenance of their assets or properties have been made or given in a timely
fashion.
SECTION 3.24 LABOR MATTERS. There is no labor strike, slowdown, stoppage
or other labor difficulty actually pending or, to the Company's knowledge,
threatened against the Company or any of its Subsidiaries. There is no
collective bargaining agreement or union contract binding upon the Company or
any of its Subsidiaries, and there has not been any such agreement or contract
in effect at any time during the preceding three years.
SECTION 3.25 CUSTOMERS. Schedule 3.25 lists the 10 largest customers of
the Company and its Subsidiaries for the most recent fiscal year and sets forth
opposite each name the percentage of total consolidated revenues attributable to
such customer for such year. Except as set forth on Schedule 3.25, no such
customer has terminated, or to the Company's knowledge, threatened to terminate,
its relationship with the Company or its Subsidiaries, and the Company believes
its relationship with such customers is good.
SECTION 3.26 DISCLOSURE. Except as set forth on Schedule 3.26, no
representation or warranty of the Company in this Agreement and no information
contained in any Schedule or other writing delivered by the Company pursuant to
this Agreement or at the Closing contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact required to
make the statements
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herein or therein not misleading. There is no fact that the Company has not
disclosed to Buyer or Newco in writing that has had or, insofar as the Company
can now foresee, may have a material adverse effect on the ability of the
Company to perform fully this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to, and covenants and agrees with, the
Company that:
SECTION 4.01 ORGANIZATION AND GOOD STANDING OF BUYER. Each of Buyer and
its Subsidiaries has been duly organized and is existing as a corporation in
good standing under the laws of the State of its jurisdiction of incorporation
with full power and authority (corporate and other) to own and lease its
properties and to conduct its business as currently conducted. Each of Buyer and
its Subsidiaries has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
jurisdiction in which the nature of its business or location of its properties
requires such qualification and in which the failure to so qualify would have a
Material Adverse Effect on Buyer.
SECTION 4.02 SUBSIDIARIES. All of Buyer's Subsidiaries, including Newco,
are set forth on Schedule 4.02. Except as set forth on Schedule 4.02, Buyer does
not own any shares of capital stock, partnership interests or other beneficial
ownership interests in any other Person.
SECTION 4.03 AUTHORIZATION. Each of Buyer and Newco has the corporate
power and authority to execute and deliver this Agreement, to consummate the
transactions contemplated hereby and to perform its obligations under this
Agreement. The execution and delivery by each of Buyer and Newco of this
Agreement, and the consummation by each of them of the transactions contemplated
hereby, have been duly authorized by all necessary corporate action on the part
of each of Buyer and Newco, subject to obtaining the requisite shareholder
approval. This Agreement, upon its execution and delivery by each of Buyer and
Newco (assuming the due authorization, execution and delivery hereof by the
other parties hereto), will constitute the legal, valid and binding obligation
of each of Buyer and Newco, enforceable against each of Buyer and Newco in
accordance with its terms.
SECTION 4.04 NO CONFLICTS. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
HSR Act and the filing of the Certificate of Merger as required by the New York
Law, the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by Buyer and Newco will not
(a) conflict with or result in a breach or violation of any term or provision
of, or constitute a default under (with or without notice or passage of time, or
both), or otherwise give any Person a basis for accelerated or increased rights
or termination or nonperformance under, any indenture, mortgage, deed of trust,
loan or credit agreement, lease, license or other agreement or instrument to
which Buyer or any of its Subsidiaries is a party or by which Buyer or any of
its Subsidiaries is bound or affected or to which any of the property or assets
of Buyer or any of its Subsidiaries is bound, (b) result in the violation of the
provisions of the Certificate of Incorporation or Bylaws of Buyer or any of its
Subsidiaries or any Legal Requirement applicable to or binding upon Buyer or any
of its Subsidiaries, (c) result in the creation or imposition of any Lien upon
any property or asset of Buyer or any of its Subsidiaries or (d) otherwise
adversely affect the contractual or other legal rights or privileges of Buyer or
any of its Subsidiaries. Schedule 4.04 set forth a list of all agreements to
which the Buyer or any of its Subsidiaries is a party requiring the consent of
any party thereto to any of the transactions contemplated hereby.
SECTION 4.05 CAPITALIZATION. The authorized capital stock of Buyer
consists solely of (i) 27,500,000 shares of Buyer Common Stock, of which
21,478,624 are issued and outstanding and 5,114,940 are reserved for issuance
upon exercise of outstanding options and warrants and conversion of Buyer
Preferred Stock, and (ii) 1,000,000 shares of Buyer Preferred Stock, of which
29,778 shares are issued and outstanding. All of the issued and outstanding
shares of Buyer Common Stock and Buyer
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Preferred Stock are duly authorized, validly issued, fully paid, nonassessable,
and free of all preemptive rights. All of the Merger Shares and Additional
Shares, if any, to be issued pursuant to this Agreement, when issued in
accordance with this Agreement, will be duly authorized, validly issued, fully
paid, nonassessable, free of all preemptive rights and, subject to official
notice of issuance, authorized for listing on the NASDAQ National Market System.
The authorized capital stock of Newco consists solely of 1,000 shares of common
stock, $.01 par value per share, 100 of which are, and on the Closing Date will
be, issued and outstanding. All of the issued and outstanding shares of capital
stock of Newco are, and on the Closing Date will be, owned beneficially and of
record by Buyer. Other than as set forth on Schedule 4.05 (i) there are no
existing options, warrants, rights, calls or commitments of any character
relating to shares of Buyer Common Stock , (ii) there are no outstanding
securities or other instruments convertible into or exchangeable for shares of
Buyer's capital stock and no commitments to issue such securities or instruments
and (iii) no Person has any right of first refusal, preemptive right,
subscription right or similar right with respect to any shares of Buyer's
capital stock. The offer, issuance and sale of the outstanding shares of Buyer
Common Stock and Buyer Preferred Stock were issued in compliance with the
registration and prospectus delivery requirements of the Securities Act (or
exemptions therefrom), the requirements of all applicable state securities laws,
and accomplished in conformity with all other Legal Requirements. Except as set
forth on Schedule 4.05, there are no voting agreements, voting trusts or similar
arrangements or understandings to which Buyer or any of its Subsidiaries is a
party or is bound with respect to the voting of the capital stock of Buyer or
its Subsidiaries. Except as set forth in Schedule 4.05, none of the awards,
grants or other agreements pursuant to which Buyer stock options or warrants
were issued have provisions which accelerate the vesting or right to exercise
such options or warrants upon the execution of this Agreement, the consummation
of the transactions contemplated by this Agreement or any "change of control"
events.
SECTION 4.06 BUYER REPORTS AND FINANCIAL STATEMENTS. Buyer has previously
furnished to the Company complete and accurate copies, as amended and
supplemented, of its (a) Annual Report on Form 10-K for its fiscal year ended
June 30, 1997, (b) Quarterly Reports on Form 10-Q for its fiscal quarters ended
September 30, 1997 and December 31, 1997, (c) Proxy Statement related to its
annual stockholders' meeting held on March 6, 1996, each as filed with the
Commission, and (d) all other reports filed by Buyer under Section 13 of the
Exchange Act with the Commission since June 30, 1997 (such reports are
collectively referred to herein as the "BUYER REPORTS"). The Buyer Reports
include all of the documents required to be filed by Buyer under the Exchange
Act with the Commission since June 30, 1997. As of their respective dates, the
Buyer Reports did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading. The audited financial statements and
unaudited interim financial statements of Buyer included in the Buyer Reports
(i) comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, (ii) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby (except as may be
indicated therein or in the notes thereto, and in the case of quarterly
financial statements, as permitted by Form 10-Q under the Exchange Act), (iii)
fairly present the consolidated financial condition, results of operations and
cash flows of Buyer and its Subsidiaries as of the respective dates thereof and
for the periods referred to therein subject, in the case of unaudited financial
statements, to normal, recurring year-end adjustments and any other adjustments
described therein, and (iv) are consistent with the books and records of Buyer.
SECTION 4.07 JUDGMENTS; LITIGATION. Except as set forth on Schedule 4.07:
(a) There is no (i) outstanding judgment, order, decree, award,
stipulation, injunction of any Governmental Entity or arbitrator against or
affecting Buyer or any of its Subsidiaries or their respective properties,
assets or businesses or (ii) Action pending against or affecting Buyer or
any of its Subsidiaries or their respective properties, assets or
businesses.
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(b) To Buyer's knowledge, there is no (i) outstanding judgment, order,
decree, award, stipulation, injunction of any Governmental Entity or
arbitrator against or affecting any officer, director or employee of Buyer
or any of its Subsidiaries relating to Buyer or any of its Subsidiaries or
their respective businesses, (ii) Action threatened against Buyer or any of
its Subsidiaries or their respective properties, assets or businesses, (iii)
Action pending or threatened against the officers, directors or employees of
Buyer or its Subsidiaries relating to Buyer or any of its Subsidiaries or
their respective businesses or (iv) basis for the institution of any Action
against Buyer or any of its Subsidiaries or any of their respective
officers, directors, employees, properties or assets which, if decided
adversely, would have a Material Adverse Effect on Buyer.
SECTION 4.08 EMPLOYEE BENEFIT MATTERS.
(a) Schedule 4.08(a) is a complete list of all Buyer Plans. True and
complete copies of each of the following documents (and any amendments
thereto), where applicable, have been delivered previously to the Company:
(i) the Buyer Plan documents; (ii) a written description of any Buyer Plan
which is not in writing; (iii) if the Buyer Plan is funded through a trust
or any third-party funding vehicle, the trust or other funding agreement;
(iv) the Buyer Plan's most recent financial statements; (v) the two most
recent annual reports (including all schedules and attachments thereto)
required by ERISA; (vi) the most recent actuarial report and valuation;
(vii) the most recent determination letter received from the IRS with
respect to each Buyer Plan that is intended to be qualified under Code
Section 401 or to be recognized as tax-exempt under Code Section 501(c);
(viii) the most recent summary plan description and each summary of material
modifications required by ERISA; (ix) any agreement providing for the
provision of administrative or investment management services with respect
to the Buyer Plan; and (x) all documents and correspondence received from or
provided to the Department of Labor, IRS, and Pension Benefit Guaranty
Corporation during the past two years.
(b) Each Buyer Plan and related trust, annuity, or other funding
agreement complies and has been maintained in compliance with all applicable
Legal Requirements. No non-exempt prohibited transaction (as defined in Code
Section 4975 and ERISA Sections 406 and 408) has occurred and no "fiduciary"
(as defined in ERISA Section 3(21)) has committed any breach of duty which
could subject Buyer, any Buyer ERISA Affiliate, or any director, officer, or
employee thereof to liability under Title I of ERISA or to tax under Code
Section 4975. All material obligations required to be performed by Buyer and
any other Person under the terms of each Buyer Plan and applicable Legal
Requirements have been performed.
(c) All required reports and descriptions, including, without
limitation, annual reports (Form 5500), summary annual reports, and summary
plan descriptions, have been filed and distributed timely. With respect to
each Buyer Plan which is a welfare plan (as defined in ERISA Section 3(1)),
the requirements of Part 6 of Subtitle B of Title I of ERISA and of Code
Sections 162(k) and 4980B have been satisfied.
(d) All contributions, premiums, and other payments, including, without
limitation, employer contributions and employee salary reduction
contributions, have been paid when due or accrued in accordance with the
past custom and practice of Buyer and any Buyer ERISA Affiliate. No Buyer
Plan that is subject to Part 3 of Subtitle B of Title I of ERISA or to Code
Section 412 has incurred any accumulated funding deficiency, whether or not
waived, and no other actual or contingent liability for any other expenses
or obligations of any Buyer Plan exists.
(e) There are no pending or, to Buyer's knowledge, threatened Actions
(other than routine claims for benefits) asserted or instituted against any
Buyer Plan or the assets of any Buyer Plan, or against Buyer, or any Buyer
ERISA Affiliate, trustee, administrator, or fiduciary of such Buyer Plan,
and Buyer has no knowledge of any facts that could form the basis of any
such Action.
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(f) Buyer (or, if applicable, a Buyer ERISA Affiliate) may terminate,
suspend, or amend each Buyer Plan at any time, except to the extent
otherwise required by Code Section 4980B, without the consent of the
participants or employees covered by such Buyer Plan. Neither the Company
nor any Buyer ERISA Affiliate has announced any intention, made any
amendment or binding commitment, or given any written or oral notice
providing that Buyer or a Buyer ERISA Affiliate (i) will create additional
Plans covering employees of Buyer or any Buyer ERISA Affiliate, (ii) will
increase benefits promised or provided pursuant to any Buyer Plan, or (iii)
will not exercise after the Closing Date any right or power it may have to
terminate, suspend, or amend any Buyer Plan.
(g) Neither Buyer nor any Buyer ERISA Affiliate maintains or has
maintained at any time, or contributes to or has contributed to or is or was
required to contribute to, any (i) Buyer Plan subject to Title IV of ERISA,
including, without limitation, any multi-employer plan (as defined in ERISA
Section 3(37)), within the past five years, or (ii) funded or unfunded
medical, health, accident, or life insurance plan or arrangement for current
or future retirees or terminated employees or their spouses or dependents
(except to the extent required by Code Sections 162(k) or 4980B).
(h) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will constitute a
termination of employment or other event entitling any Person to any
additional or other benefits, or that would otherwise modify benefits or the
vesting of benefits, provided under any Buyer Plan.
(i) No event has occurred which could subject Buyer or any Buyer ERISA
Affiliate to any material liability (i) under any Legal Requirement relating
to any Buyer Plan, or (ii) resulting from any obligation of Buyer or a Buyer
ERISA Affiliate to indemnify any Person against liability incurred with
respect to or in connection with any Buyer Plan.
(j) Each Buyer Plan which is intended to be qualified under Code Section
401 has received, within the last three years, a favorable determination
letter from the IRS. No event has occurred and no facts or circumstances
exist which may cause or result in the loss or revocation of such
determination.
(k) There are not unfunded liabilities with respect to any Buyer Plan,
and each Buyer Plan could be terminated as of the date of the Closing with
no liability to Buyer, the Company or any Buyer ERISA Affiliate.
(l) There are no agreements of Buyer or any of its Subsidiaries which
will or may provide payments to any officer, employee, shareholder, or
highly compensated individual of Buyer or any of its Subsidiaries which will
be "parachute payments" under Code Section 280G that are nondeductible to
Buyer or its Subsidiaries or subject to tax under Code Section 4999 for
which Buyer or any Buyer ERISA Affiliate would have withholding liability.
SECTION 4.09 INCOME AND OTHER TAXES. Except as set forth on Schedule 4.09:
(a) All Tax Returns required to be filed through and including the date
hereof in connection with the operations of Buyer are true, complete and
correct in all respects and have been properly and timely filed. Buyer has
not requested any extension of time within which to file any Tax Return,
which Tax Return has not since been filed. The Company has heretofore been
furnished by Buyer with true, correct and complete copies of each Tax Return
of Buyer with respect to the past three taxable years, and of all reports
of, and communications from, any Governmental Entities relating to such
period. Buyer has disclosed on its Federal income Tax Returns all positions
taken therein that could give rise to a substantial understatement of income
Taxes for federal income tax purposes within the meaning of Code Section
6662.
(b) All Taxes required to be paid or withheld and deposited through and
including the date hereof in connection with the operations of Buyer have
been duly and timely paid or deposited by
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Buyer. Buyer has properly withheld or collected all amounts required by law
for income Taxes, employment Taxes and withholding Taxes relating to its
employees, creditors, independent contractors and other third parties, and
for Taxes on sales, and has properly and timely remitted such withheld or
collected amounts to the appropriate Governmental Entity. Buyer has no
liabilities for any Taxes for any taxable period ending prior to or
coincident with the Closing Date.
(c) Buyer has made adequate provision on its books of account for all
Taxes with respect to its business, properties and operations through the
Buyer Balance Sheet Date, and the accruals for Taxes in the Buyer Balance
Sheet are adequate to cover all liabilities for Taxes of Buyer for all
periods ending on or before the Closing Date.
(d) Buyer has not heretofore (i) had a tax deficiency proposed, asserted
or assessed against it, (ii) executed any waiver of any statute of
limitations on the assessment or collection of any Taxes, or (iii) been
delinquent in the payment of any Taxes.
(e) No Tax Return of Buyer has been audited or the subject of other
Action by any Governmental Entity. Buyer has not received any notice from
any Governmental Entity of any pending examination or any proposed
deficiency, addition, assessment, demand for payment or adjustment relating
to or affecting Buyer or its assets or properties and Buyer has not any
reason to believe that any Governmental Entity may assess (or threaten to
assess) any Taxes for any periods ending on or prior to the Closing Date.
(f) Buyer (i) has not filed any consent or agreement pursuant to Code
Section 341(f), and no such consent or agreement will be filed at any time
on or before the Closing Date; (ii) has not made any payments, is not
obligated to make any payments and is not a party to any agreement that
under certain circumstances could obligate Buyer to make any payments that
will not be deductible under Code Section 280G; (iii) is not a United States
real property holding corporation within the meaning of Code Section
897(c)(2); (iv) is not a party to a tax allocation or sharing agreement; (v)
has never been (or does not have any liability for unpaid Taxes because it
was) a member of an affiliated group with the meaning of Code Section
1504(a); (vi) has never applied for a tax ruling from a Governmental Entity;
(vii) has never filed or been the subject of an election under Code Section
338(g) or Code Section 338(h)(10) or caused or been the subject of a deemed
election under Code Section 338(e); (viii) has not participated in, or
cooperated with, an international boycott within the meaning of Section 999
of the Code; and (ix) has not issued or assumed any acquisition indebtedness
as defined in Section 279(b) of the Code.
(g) Set forth on Schedule 4.09(g) is the amount, as of the most recent
practicable date, of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax or excess charitable
contribution.
SECTION 4.10 HAZARDOUS MATERIALS. Except as set forth on Schedule 4.10:
(a) To Buyer's knowledge, no Hazardous Material (i) has been released,
placed, stored, generated, used, manufactured, treated, deposited, spilled,
discharged, released or disposed of on or under any real property currently
or previously owned or leased by Buyer or any of its Subsidiaries, (ii) is
presently maintained, used, generated, or permitted to remain in place by
Buyer or any of its Subsidiaries in violation of any Environmental Law,
(iii) is required by any Environmental Law to be eliminated, removed,
treated or mitigated by Buyer or any of its Subsidiaries, given the nature
of its present condition, location, nature, material or maintenance, or (iv)
is of a type, location, material, nature or condition which requires special
notification to third parties by Buyer or any of its Subsidiaries under
Environmental Law or common law, in any of such cases which would have a
Material Adverse Effect on Buyer.
(b) No notice, citation, summons or order has been received by Buyer or
any of its Subsidiaries, no notice has been given by Buyer or any of its
Subsidiaries and no complaint has been filed, no
A-24
penalty has been assessed and no investigation or review is pending or, to
Buyer's knowledge, threatened by any Governmental Entity, with respect to
(i) any alleged violation by Buyer or any of its Subsidiaries of any
Environmental Law or (ii) any alleged failure by Buyer or any of its
Subsidiaries to have any environmental permit, certificate, license,
approval, registration or authorization required in connection with its
business or properties, or (iii) any use, possession, generation, treatment,
storage, recycling, transportation, release or disposal by or on behalf of
Buyer or any of its Subsidiaries of any Hazardous Material.
(c) Neither Buyer nor any of its Subsidiaries has received any request
for information, notice of claim, demand or notification that it is or that
indicates that it may be a "potentially responsible party" with respect to
any investigation or remediation of any threatened or actual release of any
Hazardous Material.
(d) No above-ground or underground storage tanks, whether or not in use,
are or have ever been located at any property currently owned or leased by
Buyer or any of its Subsidiaries.
(e) No notice has been received by Buyer or any of its Subsidiaries with
respect to the listing or proposed listing of any property currently or
previously owned, operated or leased by Buyer or any of its Subsidiaries on
the National Priorities List promulgated pursuant to CERCLA, CERCLIS or any
similar state list of sites requiring investigation or cleanup.
(f) There have been no environmental inspections, investigations,
studies, tests, reviews or other analyses conducted in relation to any real
property currently owned or leased by Buyer or any of its Subsidiaries.
(g) Neither Buyer nor any of its Subsidiaries has released, transported,
or arranged for the transportation of any Hazardous Material from any
property currently or previously owned, operated or leased by Buyer or any
of its Subsidiaries.
SECTION 4.11 ACCOUNTS RECEIVABLE. All accounts receivable of Buyer
reflected in the Buyer Balance Sheet and all accounts receivable of Buyer that
have arisen since the Buyer Balance Sheet Date (except such accounts receivable
as have been collected since such dates) are valid and enforceable claims
against the account debtor, and the goods and services sold and delivered that
gave rise to such accounts were sold and delivered in conformity with all
applicable express and implied warranties, purchase orders, agreements and
specifications. Such accounts receivable of Buyer are subject to no valid
defense, offset or counterclaim and are fully collectible in the Ordinary
Course, except to the extent of the allowance for doubtful accounts reflected on
the Buyer Balance Sheet.
SECTION 4.12 MATERIAL CONTRACTS. All material contracts, leases,
agreements and arrangements to which Buyer or any of its Subsidiaries is a party
are legally valid, binding and enforceable in accordance with their terms and in
full force and effect, and Buyer has provided the Company with the opportunity
to review and copy all such documents. Buyer and, to the knowledge of Buyer, all
parties to such contracts, leases, agreements and arrangements have complied
with the provisions of such contracts, leases, agreements and arrangements, and
neither Buyer nor its Subsidiaries is and, to the knowledge of Buyer, no other
party is, in default thereunder, and no event has occurred which, but for the
passage of time or the giving of notice or both, would constitute a default
thereunder. Set forth on Schedule 4.12 is a list of all such material contracts,
leases, agreements and arrangements, including those contracts to which Buyer or
any of its Subsidiaries is a party which cannot be terminated or do not
terminate within 12 months or less without cause or obligate Buyer or any of its
Subsidiaries for amounts in excess of $50,000.00. Except as set forth on
Schedule 4.12, none of such contracts or agreements will, by its terms,
terminate as a result of the transactions contemplated hereby or require any
consent from any obligor thereto in order to remain in full force and effect
immediately after the Effective Time.
SECTION 4.13 NO UNDISCLOSED LIABILITIES. Except (i) to the extent set
forth or provided for in the audited financial statements and unaudited interim
financial statements of Buyer included in the Buyer
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Reports, (ii) as set forth on Schedule 4.13 or (iii) for non-material current
liabilities incurred since December 31, 1997 in the Ordinary Course, as of the
date hereof the Buyer and its Subsidiaries have no liabilities, whether accrued,
absolute, contingent or otherwise, whether due or to become due and whether the
amounts thereof are readily ascertainable or not, or any unrealized or
anticipated losses from any commitments of a contractual nature.
SECTION 4.14 CONSENTS. No consent, approval, authorization, license,
permit or other action by, or filing with, any governmental or regulatory
authority is required in connection with the execution and delivery of this
Agreement by Buyer or the consummation by Buyer of the transactions contemplated
hereby, except for such consents, approvals, authorizations, licenses, permits,
actions or filings as will have been obtained, taken or filed at or prior to the
Closing.
SECTION 4.15 ABSENCE OF CERTAIN CHANGES. Since the Buyer Balance Sheet
Date, neither Buyer nor any of its Subsidiaries has made or suffered any change
in, or condition affecting, their respective condition (financial or otherwise),
properties, profitability, prospects or operations other than changes, events or
conditions in the Ordinary Course, none of which (individually or in the
aggregate) has had, or which Buyer can now reasonably foresee will have, a
Material Adverse Effect on Buyer.
SECTION 4.16 BROKERS' FEES. Except as disclosed on Schedule 4.16, no
broker, finder or similar agent has been employed by or on behalf of Buyer in
connection with this Agreement or the transactions contemplated hereby, and
Buyer has not entered into any agreement or understanding of any kind with any
person or entity for the payment of any brokerage commission, finder's fee or
any similar compensation in connection with this Agreement or the transactions
contemplated hereby.
SECTION 4.17 COMPLIANCE WITH LAW. Buyer is in compliance in all material
respects with all Legal Requirements in connection with the operation of its
business and the ownership and maintenance of its assets and properties. To
Buyer's knowledge, all filings and notices required to be made by Buyer with any
Governmental Entity in connection with the operation of its business or the
ownership and maintenance of its assets or properties have been made or given in
a timely fashion.
SECTION 4.18 CUSTOMERS. Schedule 4.18 lists the 10 largest customers of
Buyer and its Subsidiaries for the 12 months ended December 31, 1997, and sets
forth opposite each name the percentage of total consolidated revenues
attributable to such customer for such year. Except as set forth on Schedule
4.18, no such customer has terminated, or to Buyer's knowledge, threatened to
terminate, its relationship with Buyer or its Subsidiaries, and Buyer believes
its relationship with such customers is good.
SECTION 4.19 SEVERANCE ARRANGEMENTS. Except as set forth on Schedule 4.19,
neither Buyer nor its Subsidiaries is subject to any agreement with any employee
(i) the benefits of which (including severance benefits) are contingent, or the
terms of which are materially altered, upon the occurrence of a transaction of
the nature of that contemplated by this Agreement or the Merger, or (ii)
providing for severance benefits beyond those described in Schedule 4.19, or
which are conditioned upon a change in control of Buyer, after the termination
of employment of such employee regardless of the reason for such termination of
employment, and neither Buyer nor its Subsidiaries is a party to any employment
agreement or compensation guarantee for a period longer than one year from the
date hereof. Schedule 4.19 sets forth all employment agreements and compensation
guarantees, regardless of duration, to which Buyer or any of its Subsidiaries is
a party.
SECTION 4.20 DISCLOSURE. Except as set forth on Schedule 4.20, no
representation or warranty of Buyer in this Agreement and no information
contained in any Schedule or other writing delivered by Buyer pursuant to this
Agreement or at the Closing contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact required to make
the statements herein or therein not misleading. There is no fact that Buyer has
not disclosed to the Company in writing that has had or, insofar as Buyer can
now foresee, may have a material adverse effect on the ability of Buyer to
perform fully this Agreement.
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ARTICLE V
PREPARATION OF PROXY STATEMENT AND
REGISTRATION OF MERGER SHARES
SECTION 5.01 REGISTRATION STATEMENT. The Company and Buyer, as promptly as
practicable, shall prepare, and Buyer shall file with the Commission, a
registration statement under the Securities Act, on Form S-4, registering the
offer and sale of the Merger Shares, the Additional Shares and the Warrant
Shares, which shall include the Proxy Statement/Prospectus (defined below)
relating to the offer and sale of the shares of Buyer Common Stock which
complies in form with applicable Commission requirements (such registration
statement, as the same may be amended or supplemented, being referred to herein
as the "REGISTRATION STATEMENT"), and the Company and Buyer shall use
commercially reasonable efforts to cause the Registration Statement to become
effective as soon as practicable after the receipt of final comments from the
Commission thereon. As soon as practicable after the execution of this
Agreement, Buyer, with the cooperation of the Company, shall prepare a
Prospectus, Notice of Meeting of Stockholders and Proxy Statement (collectively,
the "PROXY STATEMENT/PROSPECTUS") for the shareholders of Buyer and the Company
in connection with their approval of the Merger, the adoption of this Agreement,
the approval of any other matters required to be approved by them in accordance
with the terms of this Agreement, and the issuance of the Merger Shares, the
Additional Shares and the Warrant Shares. The Proxy Statement/Prospectus shall
include a proposal to Buyer's stockholders to amend Buyer's certificate of
incorporation to (i) change its name to a name to be agreed upon by Buyer and
the Company, and (ii) provide for a staggered board of directors consisting of
three classes, with the Class I directors to serve for an initial one-year term,
the Class II directors for an initial two-year term, and the Class III directors
for an initial three-year term, and each director, after his or her initial
term, to serve for successive three-year terms. The Proxy Statement/Prospectus
shall constitute a disclosure document for the offer and sale of the shares of
Buyer Common Stock to be received by the Shareholders pursuant to the Merger.
The Company shall furnish to Buyer all information concerning the Company and
the Shareholders and take such other actions as may be reasonably requested by
Buyer in connection with any action contemplated by this Section 5.01.
Notwithstanding the foregoing, the Proxy Statement/Prospectus may be filed as
preliminary proxy material pursuant to Rule 14a-6 under the Exchange Act until
such time as Buyer and the Company shall have responded to all comments of the
Commission thereon, at which time the Proxy Statement/Prospectus shall be filed
as part of the Registration Statement pursuant to the Securities Act.
SECTION 5.02 PREPARATION OF REGISTRATION STATEMENT.
(a) Each of Buyer and Company agrees to provide promptly to the other
such information concerning its business and financial statements and
affairs as, in the reasonable judgment of the providing party or its
counsel, may be required or appropriate for inclusion in the Registration
Statement, or in any amendments or supplements thereto, and to cause its
counsel and auditors to cooperate with the other party's counsel and
auditors in the preparation of the Registration Statement. Buyer and Company
shall each use their commercially reasonable efforts to cause the
Registration Statement to comply with applicable federal and state
securities laws requirements. The Company will promptly advise Buyer, and
Buyer will promptly advise the Company, in writing if at any time prior to
the Effective Time either the Company or Buyer shall obtain knowledge of any
facts that might make it necessary or appropriate to amend or supplement the
Registration Statement in order to make the statements contained or
incorporated by reference therein not misleading or to comply with
applicable law. The Registration Statement shall contain the recommendation
of the board of directors of Buyer that the shareholders of Buyer approve
the Merger and the adoption of this Agreement and the conclusion of the
board of directors of Buyer, based in part on its reliance on the fairness
opinion referred to in Section 6.02(e), that the terms and conditions of the
Merger are fair and reasonable to the shareholders of Buyer from a financial
point of view.
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(b) None of the information supplied or to be supplied by or on behalf
of the Company, for inclusion in the Registration Statement, will, at the
date such information is supplied and, as thereafter amended or
supplemented, contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein,
in light of the circumstances under which they are made, not misleading or,
as thereafter amended or supplemented, will at the time the Registration
Statement becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading.
(c) None of the information supplied or to be supplied by or on behalf
of Buyer, for inclusion in the Registration Statement, will, at the date
such information is supplied and, as thereafter amended or supplemented,
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading or, as
thereafter amended or supplemented, will at the time the Registration
Statement becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading.
SECTION 5.03 REGISTRATION OF SHARES UNDER STOCK OPTION PLAN. Prior to the
Closing Date, the Board of Directors of Buyer shall adopt a 1998 Stock Option
and Restricted Stock Option Plan and, prior to the Effective Time, shall cause
such plan to be submitted to the stockholders of Buyer for their approval. All
options to purchase shares of Buyer Common Stock issued in exchange for Plan
Options pursuant to Section 2.06(b) shall be issued under such newly adopted
plan. As soon as practicable after the Effective Time, Buyer shall register on a
Form S-8 registration statement under the Securities Act the shares of Buyer
Common Stock which are authorized for issuance under such newly adopted plan, as
contemplated by Section 6.03(i).
ARTICLE VI
CONDITIONS TO CONSUMMATION OF MERGER
SECTION 6.01 CONDITIONS TO EACH PARTY'S OBLIGATIONS. Notwithstanding any
other provision of this Agreement, the obligations of each party hereto to
consummate the Merger and the other transactions contemplated hereby shall be
subject to the satisfaction, at or prior to the Closing Date, of the following
conditions:
(a) The holders of shares of Buyer Common Stock and the Shareholders
each shall have approved the adoption of this Agreement and any other
matters required by be approved by them by requisite vote under applicable
Legal Requirements and Exchange or NASDAQ rules, and in accordance with the
terms of this Agreement.
(b) The number of Dissenters' Shares shall not exceed five percent (5%)
of the aggregate number of issued and outstanding shares of Common Stock as
of the Effective Time.
(c) Any Person required in connection with the transactions contemplated
hereby to file a notification and report form in compliance with the HSR Act
shall have filed such form and the applicable waiting period with respect to
each such form (including any extension thereof by reason of a request for
additional information) shall have expired or been terminated.
(d) No Governmental Entity (including a federal or state court) of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction
or other order (whether temporary, preliminary or permanent) which is in
effect
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and which prevents or prohibits consummation of the Merger or any material
transaction contemplated by this Agreement; PROVIDED, HOWEVER, that the
parties shall use their reasonable efforts to cause any such order, decree,
judgment, injunction or other order to be vacated or lifted.
(e) Buyer shall have received all material permits and other
authorizations, if any, required under applicable securities laws for the
issuance of the Merger Shares.
(f) The Registration Statement shall have been declared effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect.
(g) All authorizations, consents, waivers and approvals by or from third
parties required for the consummation of the transactions contemplated
hereby shall have been obtained.
(h) Buyer, the Escrow Agent and the Representative shall have executed
and delivered the Escrow Agreement.
(i) Xxxxxx Equity Investors III, L.P., ITC Services Company, Xxxxxx
Xxxxx, The Xxxxxx Xxxxx 1995 Grantor Retained Annuity Trust, Codinvest
Limited, Xxxxxxx X. Xxxxxx and Xxxxxx X. Pounds shall have entered into the
Shareholders Agreement.
SECTION 6.02 CONDITIONS TO OBLIGATIONS OF BUYER AND NEWCO. Notwithstanding
any other provision of this Agreement, the obligations of Buyer and Newco to
consummate the Merger and the other transactions contemplated hereby shall be
subject to the satisfaction, at or prior to the Closing Date, of the following
conditions:
(a) The representations and warranties of the Company in this Agreement
shall be true and correct in all material respects on and as of the Closing
Date with the same effect as if made on the Closing Date and the Company
shall have complied with all covenants and agreements and satisfied all
conditions on the Company's part, as applicable, to be performed or
satisfied on or prior to the Closing Date.
(b) Buyer shall have received from Paul, Hastings, Xxxxxxxx & Xxxxxx
LLP, counsel for the Company, a written opinion dated the Closing Date and
addressed to Buyer and Newco, in substantially the form attached as Annex B
hereto;
(c) Buyer shall have received the following under cover of a certificate
of Secretary of the Company dated the Closing Date in substantially the form
attached as Annex C hereto:
(i) Copies of resolutions of (A) the board of directors of the
Company authorizing and approving the execution, delivery and performance
of this Agreement and all other documents and instruments to be delivered
by the Company pursuant hereto and thereto, and (B) the Shareholders
evidencing the approval of the Merger and the adoption of this Agreement;
(ii) A certificate of incumbency certifying the names, titles and
signatures of the officers authorized to execute the documents referred
to in subparagraph (i) above and further certifying that the Certificate
of Incorporation and Bylaws of the Company delivered to Buyer at the time
of, or prior to, the execution of this Agreement have been validly
adopted and have not been amended or modified; and
(iii) Such additional supporting documentation and other information
with respect to the transactions contemplated hereby as Buyer or its
counsel may reasonably request.
(d) Buyer shall have received a certificate of the President of the
Company in substantially the form attached as Annex D hereto.
(e) Buyer shall have received a fairness opinion from CIBC Xxxxxxxxxxx
Corp., financial advisor to Buyer, addressed to the board of directors of
Buyer to the effect that the Exchange Ratio is
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fair to the shareholders of Buyer from a financial point of view, and such
fairness opinion shall not have been withdrawn prior to the Closing Date.
(f) Buyer shall have received the resignations, effective as of the
Effective Time, of each of the directors of the Company.
(g) No act, event or condition shall have occurred after the date hereof
which Buyer determines has had or could reasonably be expected to have a
Material Adverse Effect on the Company.
(h) Buyer shall have received from Xxxxxx & Xxxx, L.L.P., counsel for
Buyer, a written opinion, in form and substance reasonably satisfactory to
Buyer, dated as of the Effective Time, substantially to the effect that the
Merger will constitute a reorganization within the meaning of Section 368(a)
of the Code and that, accordingly, no gain or loss will be recognized by the
Company, Buyer or Newco as a result of the Merger.
(i) The Company and TC Management L.L.C. shall have terminated that
certain Management and Consulting Agreement between them.
(j) Up to $2.0 million in financial accommodations contemplated by the
Commitment Letter shall have been rendered.
SECTION 6.03 CONDITIONS TO OBLIGATIONS OF THE COMPANY. Notwithstanding any
other provision of this Agreement, the obligations of the Company to consummate
the Merger and the other transactions contemplated hereby shall be subject to
the satisfaction, at or prior to the Closing Date, of the following conditions:
(a) The representations and warranties of Buyer in this Agreement shall
be true and correct in all material respects on and as of the Closing Date
with the same effect as if made on the Closing Date, and Buyer shall have
complied with all covenants and agreements and satisfied all conditions on
its part to be performed or satisfied on or prior to the Closing Date.
(b) The Company shall have received from Xxxxxx & Xxxx, LLP, counsel for
Buyer and Newco, a written opinion dated the Closing Date and addressed to
the Company, in substantially the form attached as Annex E hereto.
(c) The Company shall have received the following under cover of a
certificate of the Secretary of Buyer dated the Closing Date in
substantially the form attached as Annex F hereto:
(i) Copies of resolutions of (A) the Board of Directors of Buyer
authorizing and approving the execution, delivery and performance of this
Agreement and all other documents and instruments to be delivered by
Buyer pursuant hereto and thereto, and (B) the stockholders of Buyer
evidencing the approval of the Merger and the adoption of this Agreement;
(ii) A certificate of incumbency certifying the names, titles and
signatures of the officers authorized to execute the documents referred
to in subparagraph (i) above and further certifying that the Certificate
of Incorporation and Bylaws of Buyer delivered to the Company at the time
of, or prior to, the execution of this Agreement have been validly
adopted and have not been amended or modified; and
(iii) Such additional supporting documentation and other information
with respect to the transactions contemplated hereby as the Company or
its counsel may reasonably request.
(d) The Company shall have received from Paul, Hastings, Xxxxxxxx &
Xxxxxx LLP, counsel for the Company, a written opinion, in form and
substance reasonably satisfactory to the Company, dated as of the Effective
Time, substantially to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and that,
accordingly, no gain or loss will be recognized by the Company or the
Shareholders as a result of the Merger.
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(e) The Company shall have received a certificate of the President of
Buyer in substantially the form attached as Annex G hereto.
(f) The Company shall have received the following under cover of a
certificate of the Secretary of Newco dated the Closing Date in
substantially the form attached as Annex H hereto:
(i) Copies of resolutions of (A) the Board of Directors of Newco
authorizing and approving the execution, delivery and performance of this
Agreement and all other documents and instruments to be delivered by
Newco pursuant hereto and thereto, and (B) the shareholder of Newco
evidencing the approval of the Merger and the adoption of this Agreement;
(ii) A certificate of incumbency certifying the names, titles and
signatures of the officers authorized to execute the documents referred
to in subparagraph (i) above and further certifying that the Certificate
of Incorporation and Bylaws of Newco delivered to the Company at the time
of, or prior to, the execution of this Agreement have been validly
adopted and have not been amended or modified; and
(iii) Such additional supporting documentation and other information
with respect to the transactions contemplated hereby as the Company or
its counsel may reasonably request.
(g) The Company shall have received a certificate of the President of
Newco in substantially the form attached as Annex I hereto.
(h) The Certificate of Incorporation of Buyer shall have been amended to
increase the number of authorized shares of Buyer Common Stock in an amount
sufficient to enable Buyer to consummate the transactions contemplated by
this Agreement, including without limitation the issuance of the Merger
Shares, the Exchanged Option Shares and the Exchanged Warrant Shares.
(i) Buyer shall have adopted a 1998 Stock Option and Restricted Stock
Option Plan with the number of shares of Buyer Common Stock available
thereunder in an amount sufficient to provide for the issuance of the
Exchanged Option Shares.
(j) No act, event or condition shall have occurred after the date hereof
which the Company determines has had or could reasonably be expected to have
a Material Adverse Effect on Buyer.
(k) The Merger Shares shall have been authorized for listing on the
NASDAQ National Market upon official notice of issuance.
(l) Xxxxxxx X. Xxxxxx shall have made a payment of not less than
one-half of the principal, together with all accrued and unpaid interest,
under the terms of that certain promissory note dated September 16, 1997
made by Xxxxxxx X. Xxxxxx in favor or Buyer, as amended by that certain
Letter Agreement dated as of the date hereof.
ARTICLE VII
CONDUCT OF BUSINESS PENDING CLOSING
During the period commencing on the date hereof and continuing through the
Closing Date, each of the Company and Buyer covenants and agrees (except as
expressly contemplated by this Agreement or to the extent that the other party
shall otherwise expressly consent in writing) that:
SECTION 7.01 QUALIFICATION. It and each of its Subsidiaries will use its
commercially reasonable efforts to maintain all qualifications to transact
business and remain in good standing in the foreign jurisdictions in which it
owns or leases any property, or conducts any business, so as to require such
qualification, and in which the failure to be so qualified and be in good
standing would have a Material Adverse Effect.
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SECTION 7.02 ORDINARY COURSE. It and each of its Subsidiaries will use
commercially reasonable efforts to conduct its business in, and only in, the
Ordinary Course and shall preserve intact its current business organizations,
keep available the services of its current officers and employees and preserve
its relationships with customers, suppliers and others having business dealings
with it to the end that its goodwill and going business value shall be
unimpaired at the Closing Date, and it and each of its Subsidiaries will use its
commercially reasonable efforts to maintain its properties and assets in good
condition and repair.
SECTION 7.03 ORGANIC CHANGES. It and each of its Subsidiaries will not (a)
amend its Certificate of Incorporation or Bylaws (or equivalent documents), (b)
acquire by merging or consolidating with, or agreeing to merge or consolidate
with, or purchase substantially all of the stock or assets of, or otherwise
acquire any business or any corporation, partnership, association or other
business organization or division thereof, (c) enter into any partnership or
joint venture, (d) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock or purchase or redeem, directly or
indirectly, any shares of its capital stock, (e) issue or sell any shares of its
capital stock of any class or any options, warrants, conversion or other rights
to purchase any such shares or any securities convertible into or exchangeable
for such shares except in connection with Ordinary Course option exercises under
existing employee stock option plans, or (f) liquidate or dissolve or obligate
itself to do; PROVIDED, HOWEVER, that Buyer may amend its Certificate of
Incorporation to increase the number of authorized shares of Buyer Common Stock
in order to enable Buyer to consummate the transactions contemplated by this
Agreement.
SECTION 7.04 INDEBTEDNESS. Other than in the Ordinary Course, it and each
of its Subsidiaries will not incur any Indebtedness, sell any debt securities,
lend money to or guarantee the Indebtedness of any Person or restructure or
refinance its existing Indebtedness.
SECTION 7.05 ACCOUNTING. It and each of its Subsidiaries will not make any
change in the accounting principles, methods, records or practices followed by
it or depreciation or amortization policies or rates theretofore adopted by it,
and it and each of its Subsidiaries will maintain its books, records and
accounts in accordance with GAAP.
SECTION 7.06 COMPLIANCE WITH LEGAL REQUIREMENTS. It and each of its
Subsidiaries will comply promptly in all material respects with all requirements
that applicable law may impose upon it and its operations and with respect to
the transactions contemplated by this Agreement, and will cooperate promptly
with, and furnish information to, the other parties in connection with any such
requirements imposed upon such other party, or upon any of its affiliates, in
connection therewith or herewith.
SECTION 7.07 DISPOSITION OF ASSETS. It and each of its Subsidiaries will
not sell, transfer, license, lease or otherwise dispose of, or suffer or cause
the encumbrance by any Lien (other than Permitted Liens) upon any of, its
properties or assets, tangible or intangible, or any interest therein, except in
the Ordinary Course.
SECTION 7.08 COMPENSATION. It and each of its Subsidiaries will not (a)
adopt or amend in any material respect any collective bargaining, bonus,
profit-sharing, compensation, stock option, pension, retirement, deferred
compensation, employment or other plan, agreement, trust, fund or arrangement
for the benefit of employees (whether or not legally binding) other than to
comply with any Legal Requirement or (b) pay, or make any accrual or arrangement
for payment of, any increase in compensation, bonuses or special compensation of
any kind, or any severance or termination pay to, or enter into any employment
or loan or loan guarantee agreement with, any of its current or former officers,
directors, employees or consultants.
SECTION 7.09 MODIFICATION OR BREACH OF AGREEMENTS; NEW AGREEMENTS. It and
each of its Subsidiaries will not terminate or modify, or commit or cause or
suffer to be committed any act that will result in breach or violation of any
term of, or (with or without notice or passage of time, or both) constitute a
default under or otherwise give any person a basis for nonperformance under, any
indenture, mortgage,
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deed of trust, loan or credit agreement, lease, license or other material
agreement, instrument, arrangement or understanding, written or oral, and it and
each of its Subsidiaries will refrain from becoming a party to any contract or
commitment other than in the Ordinary Course and will meet all of its
contractual obligations in accordance with their respective terms.
SECTION 7.10 CAPITAL EXPENDITURES. Except for capital expenditures in an
amount of which shall not exceed $3.5 million in the aggregate for the Company
and its Subsidiaries and which shall not exceed $750,000 in the aggregate for
Buyer and its Subsidiaries, it and each of its Subsidiaries will not purchase or
enter into any contract to purchase any capital assets.
SECTION 7.11 MAINTAIN INSURANCE. It will use its commercially reasonable
efforts to maintain its insurance policies and bonds and self insurance
arrangements in full force and effect.
SECTION 7.12 DISCHARGE. It and each of its Subsidiaries will not cancel,
compromise, release or discharge any material claim of such party upon or
against any person or waive any of its rights of material value, and will not
discharge any Lien (other than Permitted Liens) upon any of its material assets
or compromise any of its debts or other obligations to any person other than
Liens, debts or obligations with respect to its current liabilities.
SECTION 7.13 ACTIONS. It and each of its Subsidiaries will not institute,
settle or agree to settle any Action before any Governmental Entity.
SECTION 7.14 PERMITS. It and each of its Subsidiaries will maintain in
full force and effect, and comply with, all franchises, licenses, permits,
certificates, authorizations, rights and other approvals of Governmental
Entities necessary to conduct its business as currently conducted or proposed to
be conducted, the loss of which would have a Material Adverse Effect.
SECTION 7.15 TAX ASSESSMENTS AND AUDITS. It and each of its Subsidiaries
will furnish promptly to each of the other parties a copy of all notices of
proposed assessment or similar notices or reports that are received from any
taxing authority and which relate to its operations for periods ending on or
prior to the Closing Date.
ARTICLE VIII
ADDITIONAL COVENANTS
SECTION 8.01 COVENANTS OF THE COMPANY. During the period commencing on the
date hereof and continuing through the Closing Date, the Company (on behalf of
its and, where applicable, its Subsidiaries) agrees to:
(a) comply promptly with all requirements that applicable Legal
Requirements may impose upon it with respect to the transactions
contemplated by this Agreement, and shall cooperate promptly with, and
furnish information to, Buyer in connection with any such requirements
imposed upon Buyer or upon any of its affiliates in connection therewith or
herewith;
(b) use its commercially reasonable efforts to obtain (and to cooperate
with Buyer in obtaining) any consent, authorization or approval of, or
exemption by, any Person required to be obtained or made by the Company in
connection with the transactions contemplated by this Agreement;
(c) use its commercially reasonable efforts to bring about the
satisfaction of the conditions precedent to Closing set forth in Sections
6.01 and 6.02 of this Agreement;
(d) promptly advise Buyer orally and, within three business days
thereafter, in writing of any change in the Company's business or condition
that has had or may have a Material Adverse Effect on the Company; and
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(e) deliver to Buyer prior to the Closing a written statement disclosing
any untrue statement in this Agreement or any Schedule hereto (or supplement
thereto) or document furnished pursuant hereto, or any omission to state any
material fact required to make the statements herein or therein contained
complete and not misleading, promptly upon the discovery of such untrue
statement or omission, accompanied by a written supplement to any Schedule
to this Agreement that may be affected thereby; PROVIDED, HOWEVER, that the
disclosure of such untrue statement or omission shall not prevent Buyer from
terminating this Agreement pursuant to Section 9.01(g) hereof at any time at
or prior to the Closing in respect of any original untrue or misleading
statement.
SECTION 8.02 COVENANTS OF BUYER. During the period commencing on the date
hereof and continuing through the Closing Date, Buyer (on behalf of itself and,
where applicable, its Subsidiaries) agrees to:
(a) comply promptly with all requirements that applicable Legal
Requirements may impose upon it with respect to the transactions
contemplated by this Agreement, and shall cooperate promptly with, and
furnish information to, the Company in connection with any such requirements
imposed upon the Company or upon any of the Affiliates of the Company in
connection therewith or herewith;
(b) use its commercially reasonable efforts to obtain (and to cooperate
with the Company in obtaining) any consent, authorization or approval of, or
exemption by, any Person required to be obtained or made by Buyer in
connection with the transactions contemplated by this Agreement;
(c) use its commercially reasonable efforts to bring about the
satisfaction of the conditions precedent to Closing set forth in Sections
6.01 and 6.03 of this Agreement;
(d) promptly advise the Company orally and, within three business days
thereafter, in writing of any change in Buyer's business or condition that
has had or may have a Material Adverse Effect on Buyer; and
(e) deliver to the Company prior to the Closing a written statement
disclosing any untrue statement in this Agreement or any Schedule hereto (or
supplement thereto) or document furnished pursuant hereto, or any omission
to state any material fact required to make the statements herein or therein
contained complete and not misleading, promptly upon the discovery of such
untrue statement or omission, accompanied by a written supplement to any
Schedule to this Agreement that may be affected thereby; provided, however,
that the disclosure of such untrue statement or omission shall not prevent
the Company from terminating this Agreement pursuant to Section 9.01(h)
hereof at any time at or prior to the Closing in respect of any original
untrue or misleading statement.
SECTION 8.03 ACCESS AND INFORMATION; CONFIDENTIALITY.
(a) Between the date hereof and the Closing Date, (i) the Company will
permit, and will cause the Company's officers, directors, key employees and
advisors to permit, Buyer and its representatives and agents reasonable
access to the Company's books and records, facilities, key personnel,
customers, suppliers, independent accountants and attorneys, as requested by
Buyer; and (ii) Buyer will permit, and will cause Buyer's officers,
directors, key employees and advisors to permit, the Company and its
representatives and agents reasonable access to the books and records,
facilities, key personnel, customers, suppliers, independent accountants and
attorneys, as requested by the Company.
(b) The Confidentiality Agreement dated April 30, 1997 and entered into
by the Company and Buyer (the "CONFIDENTIALITY AGREEMENT") shall survive the
execution and delivery of this Agreement.
SECTION 8.04 EXPENSES. Except as otherwise specifically provided herein,
each party to this Agreement shall bear its own direct and indirect expenses
incurred in connection with the negotiation and preparation of this Agreement
and the consummation and performance of the transactions contemplated hereby,
including, without limitation, all legal fees and fees of any brokers, finders
or similar agents;
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PROVIDED, HOWEVER, that any fees payable to any Governmental Entity in
connection with the transactions contemplated hereby (including, without
limitation, any fee to be paid by an "acquiring person" under the HSR Act and
any filing fees paid to the Commission in connection with the Proxy
Statement/Prospectus or Registration Statement) shall be paid one-half by the
Company and one-half by Buyer.
SECTION 8.05 CERTAIN NOTIFICATIONS. At all times from the date hereof to
the Closing Date, each party shall promptly notify the others in writing of the
occurrence of any event that will or may (i) render any statement,
representation or warranty of such party in this Agreement (including the
Schedules hereto) inaccurate or incomplete in any material respect or (ii)
constitute or result in the breach by such party of, or a failure to comply
with, any agreement or covenant in this Agreement applicable to such party or
(iii) result in the failure by such party to satisfy any of the conditions
specified in Article VI hereof.
SECTION 8.06 PUBLICITY; EMPLOYEE COMMUNICATIONS. At all times prior to the
Closing Date, each party shall obtain the prior consent of the other parties
hereto prior to making, or permitting its directors, officers, partners,
employees, representatives and agents to make, any public statement or press
release with respect to the transactions contemplated hereby or otherwise
disclose to any person or entity the existence, terms, content or effect of this
Agreement; PROVIDED, HOWEVER, that no party shall be prohibited from supplying
any information to any of its representatives, agents, attorneys, advisors,
financing sources and others to the extent necessary to complete the
transactions contemplated hereby so long as such representatives, agents,
attorneys, advisors, financing sources and others are made aware of and agree to
be bound by the terms of this Section 8.06; provided, further, that if, upon
advice of counsel, a disclosure is required by law, the party required to make
such disclosure shall be permitted to make such disclosure but shall make a good
faith effort to consult with the other parties hereto before making the required
disclosure. Nothing contained in this Agreement shall prevent any party to this
Agreement at any time from furnishing any required information to any
Governmental Entity or authority pursuant to a Legal Requirement or from
complying with its legal or contractual obligations.
SECTION 8.07 FURTHER ASSURANCES.
(a) Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable Legal Requirements, to consummate and
make effective the transactions contemplated by this Agreement.
(b) If at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers
or directors of the Company, Buyer or Newco, as the case may be, shall take
or cause to be taken all such necessary or convenient action and execute,
and deliver and file, or cause to be executed, delivered and filed, all
necessary or convenient documentation.
SECTION 8.08 COMPETING OFFERS; MERGER OR LIQUIDATION. Each of the Company
and Buyer agrees it will not, and it shall use its best efforts to cause its
Affiliates and each of its officers, directors, employees, representatives and
agents not to, directly or indirectly, (a) encourage or solicit any inquiry
concerning, or initiate any discussions or negotiations with any Person (other
than the Company or Buyer, as the case may be) concerning, any merger,
consolidation, sale of material assets, tender offer, recapitalization, purchase
or accumulation of shares, proxy solicitation or other business combination
involving the Company or Buyer, as the case may be, or any of its divisions (any
of the foregoing, an "ACQUISITION PROPOSAL"), or (b) provide any non-public
information concerning the business, properties or assets of the Company or
Buyer, as the case may be, to any Person (other than the Company or Buyer, as
the case may be) in connection with an Acquisition Proposal; provided however,
that in the event Buyer receives any unsolicited inquiry concerning an
Acquisition Proposal and, after consultation with counsel, is advised by its
counsel that its board of directors has a fiduciary obligation to respond to
such Acquisition Proposal in order for its directors to properly discharge their
fiduciary obligations to the Buyer's stockholders, then the Buyer may respond to
such Acquisition Proposal. In any event, the Company or Buyer, as the case may
be,
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shall immediately notify the other of, and shall disclose all details of, any
Acquisition Proposal. Each of the Company and Buyer further agrees that it will
not engage any broker, financial advisor or other consultant (other than CIBC
Xxxxxxxxxxx Corp. in the case of Buyer) on a basis which might provide such
broker, financial advisor or consultant with an incentive to initiate or
encourage any Acquisition Proposal.
SECTION 8.09 INCONSISTENT ACTION. The Company shall not take, or suffer to
be taken, any action that would cause any of the representations or warranties
of the Company in this Agreement to be untrue, incorrect, incomplete or
misleading. Buyer shall not take, or suffer to be taken, any action that would
cause any of the representations or warranties of Buyer in this Agreement to be
untrue, incorrect, incomplete or misleading.
SECTION 8.10 HSR ACT. Each of the parties hereto shall promptly file any
Notification and Report Forms and related material that it may be required to
file with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the HSR Act, shall use its reasonable best
efforts to obtain an early termination of the applicable waiting period, and
shall make any further filings or information submissions pursuant thereto that
may be necessary, proper or advisable.
SECTION 8.11 DIRECTORS AND OFFICERS OF BUYER UPON THE EFFECTIVE TIME. The
Proxy Statement/ Prospectus shall include the nomination of a slate of 12
directors for Buyer, five of whom will be proposed by Buyer, five of whom will
be proposed by the Company, and two of whom will be mutually agreed upon (but
one of such two shall be Xxxxxxx X. XxXxxxx). Upon the Effective Time, Xxxx X.
Xxxxx and Xxxxxxx X. Xxxxxx shall be the Co-Chairmen of the Board of Buyer and
Xxxxxxx X. XxXxxxx shall be its Chief Executive Officer.
SECTION 8.12 BYLAW AMENDMENT. The parties agree that Buyer will amend its
bylaws, effective upon the Closing, to require the approval of seven of 12
directors before Buyer may: (i) sell, abandon, transfer, lease or otherwise
dispose of all or a material portion of its properties or assets other than in
the ordinary course of business; (ii) make any payment on account of the
purchase, redemption or other retirement of any shares of Buyer Common Stock or
preferred stock, except as required by agreements, charter or bylaw provisions
in effect prior to the date of this Agreement; (iii) merge or consolidate with
or into, or permit any subsidiary to merge or consolidate with or into, any
other corporation or other entity (except as contemplated by this Agreement);
(iv) dissolve, liquidate or wind-up or carry out any partial liquidation or
distribution or transaction in the nature of a partial liquidation or
distribution; (v) purchase or otherwise acquire or permit any Subsidiary to
acquire (whether by purchase or lease of assets or stock or by merger or
consolidation) any tangible or intangible assets having a value of $500,000.00
or more; (vi) in any manner authorize, create, issue or sell any class of
capital stock of Buyer ranking, whether as to payments of dividends, redemptions
or distributions of assets, prior to or on a parity with, the Buyer Common
Stock, or having voting rights superior to or inconsistent with or adverse to
the Buyer Common Stock; (vii) in any manner authorize, create, issue or sell any
debt security or other debt instrument convertible into or exchangeable for any
capital stock of Buyer; (viii) take any action to cause any amendment,
alteration or repeal of any of the provisions of its certificate of
incorporation or bylaws; (ix) enter into any transaction with an Affiliate of
Buyer with a value in excess of $50,000.00; (x) issue, sell or exchange, agree
to issue, sell or exchange, or reserve or set aside for issuance, sale or
exchange, any equity security (or any debt security or other obligation with an
equity feature) of any Subsidiary; (xi) remove or elect a Chief Executive
Officer, President or Chief Financial Officer; (xii) approve compensation
increases for executive officers; (xiii) approve an operating or capital budget,
or capital expenditures exceeding $250,000.00; or (xiv) take any action with
respect to any of the foregoing matters.
SECTION 8.13 COMPANY'S 1997 AUDIT FINANCIAL STATEMENTS. The Company will
complete the audit of its financial statements for its fiscal year ended
December 31, 1997 not later than April 20, 1998 and not later than such date
will deliver a copy thereof to Buyer, together with the opinion thereof of the
Company's independent accountants.
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SECTION 8.14 SANTRY NOTE. Buyer shall not, without the prior written
consent of the Company, amend, renew, supplement, extend or otherwise modify the
terms of that certain Promissory Note dated September 16, 1997 in the original
principal amount of $3,661,505.39 by Xxxxxxx X. Xxxxxx in favor of Buyer, as
amended by that certain Letter Agreement of even date herewith or waive any term
or provision thereof.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01 TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual consent of Buyer and the Company;
(b) by the Company or by Buyer, if, upon a vote at a duly held meeting
of stockholders of Buyer or the Company, or any adjournment thereof, any
approval of the holders of Buyer Common Stock, or the Shareholders,
necessary to consummate the Merger and the transactions contemplated hereby
shall not have been obtained;
(c) by the Company, by written notice to Buyer, if, prior to the meeting
of stockholders of Buyer, the board of directors of Buyer, in the exercise
of its fiduciary duties under applicable law (i) withdraws or modifies in
any manner adverse to the Company its approval or recommendation of this
Agreement or the Merger, (ii) approves or recommends any Acquisition
Proposal by a party other than the Company or (iii) resolves to take any of
the actions specified in clauses (i) or (ii);
(d) by Buyer, by written notice to the Company, if the board of
directors of Buyer, in its good faith exercise of its business judgment,
determines (after consultation with, and upon the advice of, its counsel)
that continuing to recommend to the stockholders of Buyer the approval of
this Agreement or the Merger would be reasonably likely to be a breach of
the fiduciary duties of the board of directors of Buyer to the stockholders
of Buyer;
(e) by the Company if there has been a material breach by Buyer of
Section 8.08;
(f) by the Company, on the one hand, or by Buyer, on the other hand, by
written notice to the other party or parties hereto, if the Merger shall not
have been consummated on or before July 31, 1998 (or such later date as
Buyer and the Company may agree), provided that in the case of a termination
under this clause (f), the party or parties terminating this Agreement shall
not then be in material breach of any of its obligations under this
Agreement;
(g) by Buyer if (i) there has been a material misrepresentation, breach
of warranty or breach of covenant by the Company under this Agreement or
(ii) any of the conditions precedent to Closing set forth in Sections 6.01
or 6.02 have not been met on the Closing Date, and, in each case, Buyer is
not then in material default of its obligations hereunder; or
(h) by the Company if (i) there has been a material misrepresentation,
breach of warranty or breach of covenant by Buyer under this Agreement or
(ii) any of the conditions precedent to Closing set forth in Sections 6.01
or 6.03 have not been met on the Closing Date, and, in each case, the
Company is not then in material default of its obligations hereunder.
SECTION 9.02 EFFECT OF TERMINATION.
(a) In the case of any termination of this Agreement, the provisions of
Sections 8.03(b), 8.04 and 8.06 shall remain in full force and effect.
(b) In the event of termination of this Agreement as provided in Section
9.01(a) or 9.01(b) or 9.01(f), this Agreement shall forthwith become void
and there shall be no liability or obligation on the
A-37
part of any party hereto or their respective directors, officers, employees,
agents or other representatives.
(c) In the event of termination of this Agreement as provided in
Sections 9.01(c) or 9.01(d) or 9.01(e) or 9.01(g) or 9.01(h) hereof, subject
to Section 9.05 hereof, such termination shall be without prejudice to any
rights that the terminating party or parties may have against the breaching
party or parties or any other Person under the terms of this Agreement or
otherwise.
SECTION 9.03 AMENDMENT. This Agreement may be amended only by a written
instrument executed by each of the parties hereto. Any amendment effected
pursuant to this Section 9.03 shall be binding upon all parties hereto.
SECTION 9.04 WAIVER. Any term or provision of this Agreement may be waived
in writing at any time by the party or parties entitled to the benefits thereof.
Any waiver effected pursuant to this Section 9.04 shall be binding upon all
parties hereto. No failure to exercise and no delay in exercising any right,
power or privilege shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege preclude the exercise of any
other right, power or privilege. No waiver of any breach of any covenant or
agreement hereunder shall be deemed a waiver of any preceding or subsequent
breach of the same or any other covenant or agreement. The rights and remedies
of each party under this Agreement are in addition to all other rights and
remedies, at law or in equity, that such party may have against the other
parties.
SECTION 9.05 BREAKUP FEE. In the event that this Agreement is terminated
pursuant to Sections 9.01(c), (d) or (e), then Buyer shall promptly pay to the
Company in immediately available funds a breakup fee equal to One Million
Dollars ($1,000,000.00) plus the Company's reasonable out-of-pocket expenses
(including legal, accounting, consulting and investment banking fees) incurred
in connection with this Agreement, the Merger and the transactions contemplated
hereby, up to a maximum of $500,000.00. The parties hereby acknowledge that the
fee payable pursuant to this Section 9.05 in the event of a termination solely
pursuant to Section 9.01(c), (d) or (e) hereof constitutes the sole and
exclusive remedy of the Company for such termination, and as such, represents
the Company's liquidated damages as compensation for such termination of this
Agreement.
ARTICLE X
INDEMNIFICATION AND SURVIVAL
SECTION 10.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the parties hereto contained
in this Agreement or in any certificate delivered pursuant hereto at the
Closing shall survive the execution and delivery of this Agreement and the
Closing and the consummation of the transactions contemplated hereby (and
any examination or investigation by or on behalf of any party hereto) until
the date which is the later of 60 days after completion of the audited
consolidated financial statements of Buyer and the Company for the fiscal
year ending December 31, 1998 or April 30, 1999 (except for claims in
respect thereof pending at such time, which shall survive until finally
resolved or settled). Buyer agrees to promptly deliver a copy of such
audited financial statements to the Representative.
(b) No Action may be commenced with respect to any representation,
warranty, covenant or agreement in this Agreement, or in any writing
delivered pursuant hereto, unless written notice, setting forth in
reasonable detail the claimed breach thereof, shall be delivered to the
Buyer or the Representative, as the case may be, pursuant to Section 11.01
hereof on or before the termination of the survival period specified in
Section 10.01(a).
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SECTION 10.02 INDEMNIFICATION.
(a) The Shareholders covenant and agree to defend, indemnify and hold
harmless Buyer, each person who controls, is controlled by or is under
common control with Buyer within the meaning of the Securities Act, and each
director, officer, employee or agent of Buyer (collectively, "BUYER
INDEMNIFIED PARTIES") from and against any Damages arising out of or
resulting from: (i) any inaccuracy in or breach of any representation,
warranty, covenant or agreement made by the Company in this Agreement or in
any certificate delivered pursuant to this Agreement at the Closing; or (ii)
the failure of the Company to perform or observe fully any covenant,
agreement or provision to be performed or observed by the Company pursuant
to this Agreement.
(b) Buyer covenants and agrees to defend, indemnify and hold harmless
the Shareholders, and each person who controls, is controlled by or is under
common control with any Shareholder within the meaning of the Securities
Act, from and against any Damages arising out of or resulting from: (i) any
inaccuracy in or breach of any representation, warranty, covenant or
agreement made by Buyer in this Agreement or in any certificate delivered
pursuant to this Agreement at the Closing; or (ii) the failure of Buyer to
perform or observe fully any covenant, agreement or provision to be
performed or observed by Buyer pursuant to this Agreement.
(c) The Shareholders' liability under this Section 10.02 shall be
allocated among them pro rata in accordance with the number of Shares owned
by each of them as set forth on Annex A hereto. In the event that the
Shareholders are required to satisfy a claim for indemnification by any
Buyer Indemnified Party, such claim shall be satisfied by delivery of Escrow
Shares (valued, for such purpose, at $1.78125 per share) in accordance with
the terms of the Escrow Agreement. No Shareholder shall have any right of
contribution or equitable indemnification against the Company or the
Surviving Corporation for the Shareholders' obligations under Section
10.02(a).
(d) Notwithstanding anything in this Agreement to the contrary,
including this Article X, the indemnification obligations of the
Shareholders under Section 10.02(a) hereof and the Buyer under Section
10.02(b) hereof (i) shall apply only to the extent that the amount of
Damages suffered by the Buyer Indemnified Parties or the Shareholders,
respectively, exceeds an accumulated total of $500,000.00 in the aggregate,
at which point the obligations of the Shareholders or the Buyer, as the case
may be, shall be to indemnify only for the Damages in excess of such
accumulated total; (ii) shall be limited, in the case of the Shareholders,
to the Escrow Shares, and the Buyer Indemnified Parties shall have no
recourse against the Shareholders pursuant to this Agreement beyond recovery
of the Escrow Shares; and (iii) shall be limited, in the case of Buyer, to
the Additional Shares, and the Shareholders shall have no recourse against
Buyer pursuant to this Agreement beyond recovery of the Additional Shares.
(e) Except as otherwise expressly provided in this Agreement, all claims
by any Buyer Indemnified Party for indemnification from the Shareholders
shall be satisfied in accordance with the terms of the Escrow Agreement.
(f) In the event that Buyer is required to satisfy a claim for
indemnification by the Shareholders, such claim shall be satisfied by
dividing the amount thereof by $1.78125 (the same valuation per share set
forth in the Escrow Agreement) and issuing to the Shareholders, pro rata in
accordance with the number of Shares owned by each of them as set forth on
Annex A, a number of shares of Buyer Common Stock equal to such quotient;
provided however, that Buyer shall not be obligated to issue an aggregate
number of shares of Buyer Common Stock in excess of 1,506,092, a number
equal to the number of Escrow Shares (the "ADDITIONAL SHARES"), in
satisfaction of all its indemnification obligations under this Agreement.
(g) The indemnification provided for in this Article X shall constitute
the exclusive remedies of the Buyer Indemnified Parties, on the one hand,
and the Shareholders, on the other hand, for any post-Closing claims against
the other under this Agreement.
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(h) Notwithstanding anything in this Agreement to the contrary,
including this Article X, the indemnification obligations of the
Shareholders under Section 10.02(a) hereof and the Buyer under Section
10.02(b) hereof shall not apply to any consequential, incidental, exemplary
or punitive Damages, including but not limited to lost profits, suffered by
any Buyer Indemnified Party, on the one hand, or by the Shareholders, on the
other hand.
SECTION 10.03 THIRD PARTY CLAIMS.
(a) If any party entitled to be indemnified pursuant to Section 10.02
(an "INDEMNIFIED PARTY") receives notice of the assertion by any third party
of any claim or of the commencement by any such third party of any Action
(any such claim or Action being referred to herein as an "INDEMNIFIABLE
CLAIM") with respect to which another party hereto (an "INDEMNIFYING PARTY")
is or may be obligated to provide indemnification, the Indemnified Party
shall promptly notify the Indemnifying Party in writing (the "CLAIM NOTICE")
of the Indemnifiable Claim; provided, however, that the failure to provide
such notice shall not relieve or otherwise affect the obligation of the
Indemnifying Party to provide indemnification hereunder, except to the
extent that the Indemnifying Party is materially prejudiced by such failure.
(b) The Indemnifying Party shall have thirty (30) days after receipt of
the Claim Notice to assume defense of the Indemnifiable Claim; PROVIDED,
HOWEVER, that the Indemnifying Party will be required to consult with the
Indemnified Party with respect thereto. If the Indemnifying Party assumes
the defense of such Indemnifiable Claim, it will take all steps necessary to
investigate, defend or settle such claim and will, subject to Section 10.01,
hold the Indemnified Party harmless from and against any and all Damages
caused by or arising out of any settlement approved by the Indemnifying
Party or any judgment in connection with such Indemnifiable Claim. The
Indemnified Party will have the right to employ counsel separate from
counsel employed by the Indemnifying Party in any such action and to
participate in the defense thereof, but the fees and expenses of such
counsel employed by the Indemnified Party will be at the expense of the
Indemnified Party. Without the written consent of the Indemnified Party,
which consent will not be unreasonably withheld, the Indemnifying Party will
not consent to entry of any judgment or enter into any settlement that (a)
provides for non-monetary relief or (b) does not include an unconditional
and complete release of the Indemnified Party by the claimant or plaintiff
making the Indemnifiable Claim. Failure by the Indemnifying Party to notify
the Indemnified Party of its election to assume the defense of any
Indemnifiable Claim within 30 days after its receipt of notice thereof will
be deemed a waiver by the Indemnifying Party of its right to assume the
defense of such Indemnifiable Claim if the Indemnified Party is materially
prejudiced by such failure. In such event, the Indemnified Party may defend
against such Indemnifiable Claim in any manner it deems appropriate and may
settle such Indemnifiable Claim or consent to the entry of any judgment with
respect thereto, provided that it acts reasonably and in good faith.
(c) Buyer shall advance the costs and expenses required to defend any
Indemnifiable Claim. If the Indemnified Party is the Buyer, such costs and
expenses shall constitute Damages recoverable from the Escrow Shares. If the
Indemnified Parties are the Shareholders, such costs and expenses shall
constitute Damages for which Additional Shares shall be issued to the
Shareholders.
(d) If the Indemnifying Party does not notify the Indemnified Party
within thirty (30) days after receipt of the Claim Notice that it elects to
undertake the defense of the Indemnifiable Claim described therein, or if
the Indemnifying Party undertakes such defense but thereafter ceases to
defend such Indemnifiable Claim, the Indemnified Party shall have the right
to contest, settle or compromise the Indemnifiable Claim in the exercise of
its reasonable discretion and acting in good faith and the Indemnified Party
may recover its Damages from the Indemnifying Party, subject to the
limitations, and in the manner, set forth in this Article X; provided,
however, that the Indemnified Party shall notify the Indemnifying Party of
any compromise or settlement of any such Indemnifiable Claim.
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ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01 NOTICES. All notices and other communications under or in
connection with this Agreement shall be in writing and shall be deemed given (a)
if delivered personally, upon delivery, (b) if delivered by registered or
certified mail (return receipt requested), upon the earlier of actual delivery
or three days after being mailed, or (c) if given by telecopy, upon confirmation
of transmission by telecopy, in each case to the parties at the following
addresses:
(a) If to the Company, addressed to:
IQI, Inc.
0000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Chief Executive Officer
With copies to:
Xxxxxx Equity Investors III, L.P.
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Telecopy: (000) 000-0000
Attention: Xx. Xxxx Xxxxxxxxxx
Xx. Xxxxxxx Xxxxxxx
and to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
Twenty-Third Floor
000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Xx., Esq.
(b) If to Buyer or Newco, addressed to:
ATC Communications Group, Inc.
0000 Xxxxxxxxx Xxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attention: Xx. Xxxxxxx X. Xxxxxx
With a copy to:
Xxxxxx & Xxxx, L.L.P.
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
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SECTION 11.02 SEVERABILITY. If any term or provision of this Agreement or
the application thereof to any circumstance shall, in any jurisdiction and to
any extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable such term or
provision in any other jurisdiction, the remaining terms and provisions of this
Agreement or the application of such terms and provisions to circumstances other
than those as to which it is held invalid or enforceable.
SECTION 11.03 ENTIRE AGREEMENT. This Agreement, including the annexes and
schedules attached hereto and other documents referred to herein, and the
Confidentiality Agreement, contain the entire understanding of the parties
hereto in respect of their subject matter and supersede all prior and
contemporaneous agreements and understandings, oral and written, among the
parties with respect to such subject matter, including, without limitation, the
letter of intent dated as of February 24, 1998 between Buyer and the Company.
SECTION 11.04 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of each of the parties hereto and their respective
successors, heirs and assigns; PROVIDED, HOWEVER, that no party may assign
either this Agreement or any of its rights, interests or obligations hereunder
in whole or in part without the prior written consent of the other parties
hereto (other than to the Surviving Corporation as a result of the Merger), and
any such transfer or assignment without said consent shall be void, AB
INITIO.Subject to the immediately preceding sentence, this Agreement is not
intended to benefit, and shall not run to the benefit of or be enforceable by,
any other person or entity other than the parties hereto and their permitted
successors and assigns.
SECTION 11.05 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same Agreement.
SECTION 11.06 SCHEDULES AND ANNEXES. The schedules and annexes to this
Agreement are incorporated herein and, by this reference, made a part hereof as
if fully set forth at length herein.
SECTION 11.07 CONSTRUCTION.
(a) The article, section and subsection headings used herein are
inserted for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
(b) As used in this Agreement, the masculine, feminine or neuter gender,
and the singular or plural, shall be deemed to include the others whenever
and wherever the context so requires.
(c) For the purposes of this Agreement, unless the context clearly
requires, "or" is not exclusive.
SECTION 11.08 ARBITRATION. To the extent that the parties hereto are
unable to resolve their disputes or controversies arising out of or relating to
this Agreement, or the performance, breach, validity, interpretation or
enforcement of this Agreement, through discussion and negotiation, all such
disputes and controversies will be resolved by binding arbitration in accordance
with Title 9 of the U.S. Code (United States Arbitration Act) and the Commercial
Arbitration Rules of the American Arbitration Association (the "AAA"), and
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. A party hereto may initiate arbitration by sending
written notice of its intention to arbitrate to the other parties hereto and to
the AAA office located in Dallas, Texas (if initiated by the Company) or Los
Angeles, California (if initiated by Buyer). Such written notice will contain a
description of the dispute and the remedy sought. The arbitration will be
conducted at the offices of the AAA in Dallas, Texas (if initiated by the
Company) and the AAA office located in Los Angeles, California (if initiated by
Buyer) before an independent and impartial arbitrator acceptable to Buyer and
the Company. The party initiating arbitration shall pay the costs and expenses
of the arbitration, unless otherwise determined by the arbitrator. The decision
of the arbitrator will be final and binding on the parties hereto and their
successors and assignees. The parties intend that this agreement to arbitrate be
irrevocable.
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SECTION 11.09 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the State of New York.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on their behalf as of the day and year first above written.
IQI, INC.
By: /s/ Xxxxxxx X. XxXxxxx
-----------------------------------------
Name: Xxxxxxx X. XxXxxxx
---------------------------------------
Title: Chief Executive Officer and President
-------------------------------------
ATC COMMUNICATIONS GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxx
---------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
ATC MERGER SUB, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxx
---------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
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